
    The Union Bank at Massillon v. Philip V. Bell and others.
    1. Beneficiaries under a conveyance of land (as contradistinguished from a conveyance of the mere equity of redemption, eo nomine) in trust for the benefit of creditors, are, under section thirty-five of the code of civil procedure, proper parties defendant to a proceeding by a prior mortgagee of the same land for foreclosure and sale of the mortgaged premises. And, being such defendants, they have a right to set up the defense of usury against such mortgage, although tho trustees under the conveyance in trust for the benefit of creditors, may have neglected or refused to do so.
    2. The doctrine that a party seeking affirmative relief in a court of equity against a usurious contract, either by way of original or cross-petition, must first do equity by tendering the amount due exclusive of the usury, does nob apply to a defendant acting strictly on the defensive.
    Civil action. Reserved in the district court of Stark county.
    The action in the court of common pleas of Stark county was brought by the Union Bank against Philip V. Bell and others, on certain drafts drawn by Bell, and on a mortgage of real estate, in Stark county, given by him to. secure the drafts.
    The drafts were all drawn by Bell at Massillon, Ohio, on West & Burget of Navarre, Ohio, in favor of the cashier of the Union Bank, and payable in the city of New York, to-wit:
    1. One draft dated September 12, 1854, at 60 days, foi $2000, due November 14, 1854.
    2. One draft dated September 16, 1854, at 75 days, foi $3000, due December 3, 1854.
    
      3. One draft dated September 18, 1854, at 75 days, for $2000, due December 5, 1854.
    4. One draft dated September 28,1854, at 2 months, for $1500, due December 1,1854.
    5. One draft dated October 27, 1854, at 60 days, for $2000, due December 29, 1854.
    6. One draft dated October 27,1854, at 70 days, for $2200, due January 8, 1855.
    The mortgage was executed November 15,1854, and filed for record the next day.
    The petition avers that there remained due on the drafts at the commencement of the action (November 26, 1855), $9038 35 with interest from June 23, 1855.
    George Bell, a prior mortgagee, and Joseph D. Bell, George Shott, Elizabeth Smith and Sarah Goodwin, subsequent mortgagees, and Enos Raffensberger and Aaron Graves to whom Philip Y. Bell, on November 18,1854 (two days after the recording of the mortgage), conveyed the premises, in fee, in trust for the benefit of his creditors, were with Philip Y. Bell, the debtor, and his wife, made parties defendant, as, also, were West & Burget, the acceptors of the drafts.
    The petition prays a money judgment on the drafts, against the drawer and acceptors, and that the mortgaged premises be sold to satisfy the same.
    Philip y. Bell, made a defense; but his answer has disappeared from the files, and what his defense was does not appear ; and in June, 1857, the case was tried in the common pleas and the jury found in his favor, and the court gave judgment against the bank, and ordered the mortgage to be canceled.
    Upon an order of sale made March 2,’ 1857, previous to the trial to the jury, a portion of the mortgaged premises was sold, and the money brought into court.
    The bank appealed to the district court, wherein at the May term, 1858, Fenner, McMillen & Arthur, and divers others, creditors of Philip y. Bell, were made parties defendant; and leave was given to them and to the other defendants who had not answered, to answer in one hundred and twenty days.
    
      Afterward, and at the same term, the following entry was made in the case:
    “ And now come the plaintiff and the defendant Philip Y-Bell, and make known to the court that they have mutually arranged and finally settled the several matters in difference between the plaintiff and said Bell, and the said Bell personally appears in open court, and admits that he is justly indebted to the plaintiff in the sum of ten thousand five hundred and ninety dollars; and also confesses a judgment against himself and in favor 'of the plaintiff for said sum ; and that the plaintiff is justly entitled to have of the purchase money arising from the sale of the mortgaged premises in this case, an amount sufficient to discharge the said sum. It is therefore ordered and adjudged by said court that the plaintiffs regover against the said Phillip Y. Bell, the said sum of ten thousand five hundred and ninety dollars found due as aforesaid, and the costs of suit herein to be taxed, as between the said plaintiff and said Bell; and the court further orders, that as between the said plaintiff and said Bell, the purchase money arising from the sale of the mortgaged premises aforesaid, should be applied in discharge of said sum adjudged as aforesaid; and it is further ordered that such part or portions of the real estate described in the plaintiff’s mortgage as remains unsold by virtue of the order or orders of sale hereinbefore made, shall be sold by the sheriff of Stark county to make the amount adjudged as aforesaid; and this cause as to all other matters and things in controversy as between the several defendants, except said Bell and the plaintiff, also as between said defendants, be and shall remain open for the further order and judgment of the court. And it is ordered that the purchase money aforesaid shall remain in the hands of the officer until the further order of the court; and all other defendants, except said Bell, have full leave to contest the validity of the claim and aforesaid judgment of said plaintiff against said Bell, and the right of said plaintiff to any of said purchase money by reason thereof; and this cause is kept open for all such judgments, orders and decrees in reference to the same as justice may equire.”
    
      November 15, 1860, Fenner, McMillen & Arthur, and other defendants, judgment creditors of Philip Y. Bell, filed an amended answer in the district court, setting out the several-dates and amounts of their respective judgments recovered in the court of common pleas of Stark county, after the execution of the conveyance made by Philip Y. Bell, in trust for the benefit of his creditors; and that 'executions, issued on the judgments, had been levied on the real estate described in the petition, and that the judgments and costs remained unpaid,, etc. The answer contains also, the following averments :
    That previous to and in the year 1850, said P. Y. Bell was-in business at a place called “ Bell’s Mills,” in Stark county, as a merchant, and had a grist-mill, saw-mill and carding-machine in operation; and that West & Burget, at and during, the same time, were carrying on the business of merchants and. produce dealers at Navarre, in s^id county. That sometime previous to the year 1850, Burget, of the firm of West & Burget, informed said Bell that they all could obtain money of the Union Bank of Massillon, the plaintiff, necessary in conducting their business; and that the firm, and said Bell,, agreed to indorse for each other.
    That said Bell had no funds in New York, or elsewhere, out of Ohio; that he sold his wheat, flour, and other produce im Ohio, at Cleveland and other places, as was well known by the ■plaintiff and its officers and agents.
    That in pursuance of said agreement between said firm and’, said Bell, the latter applied to the plaintiff for a loan of money,, to be used in his business in said county; that at the request of the plaintiff, and in accordance with the -agreement between, the firm of West & Burget and said Bell, the latter and the plaintiff agreed that the manner of effecting the loan, and all. other loans, should be that said Bell should draw a bill of exchange -or draft upon West & Burget, payable to the order of the plaintiff, at some bank or banker’s office in the city of New York, and that the draft or bill should be discounted by the plaintiff for said Bell, deducting, from the face of the bill or draft, the interest upon the loan, and in the renewals, exchange between the town of Massillon and the city of New York; that said exchange, during the existence of the loan, amounted to from one to one and one quarter per cent., by means of which a rate of interest greater than that allowed by law was obtained. That in this manner, and under this contract of loan, the plaintiff, up to and in the year 1851, loaned .and advanced to said Bell, to be used in his domestic business, .about $8000, which was kept on foot and treated in all respects as a domestic loan of money, and renewed, settled and adjusted at the counter of the plaintiff, and that the drafts or bills of exchange, although, in terms, payable in the city of New York, were intended and understood to be, and were in fact, settled and adjusted at the plaintiff’s counter, in the town of Massillon. That the plaintiff knew, and had reason to believe, at the times aforesaid, that said Bell had no means or funds in the city of New York, and that he did not intend to pay said bills in New York, unless by some contrivance which .might be got up by the plaintiff. That the manner in which the loan was made, was a mere “ shift or device ” to extort from said Bell more than six per cent, interest for a loan of money.
    That said Bell has paid to the plaintiff the whole amount of the original loan and six per cent, interest upon the same, .and all charges and discount to which, by law, the plaintiff was entitled; and that the whole amount of outstanding obligations held by the plaintiff is not due, but that the excess of interest in the way of exchange, etc., is more than the amount of the claims mentioned in the petition.
    That by virtue of said agreement between said Bell and the plaintiff, said loan was renewed seven or eight times each year ■for over four years, in sums from five hundred to one, two and three thousand dollars; that at each renewal new drafts were •drawn, payable to the order of the plaintiff, at the Metropolitan Bank, or some other bank or broker’s office in the city of New York; and that on each of the drafts exchange of from one to one and a half per cent, was charged and received by the ■plaintiff, at every subsequent renewal, in the following manner: Said Bell a few days previous to the maturity of each draft, •would present to the proper officer of the plaintiff another draft payable in like manner, in New York, for wMcb said: Bell would be credited by tbe plaintiff; said Bell then would draw his check on the plaintiff, adding the exchange of from one to one and a half per cent, on the amount of the draft falling due, and forward the same, either himself, or through the plaintiff, to the place where the same was made payable, in the city of New York; that for said drafts so forwarded to New York, the plaintiff was credited, and that neither said Bell nor said West & Burget were known by said Metropolitan Bank or other bank or bankers in New York, where the drafts-were made payable, no accounts having ever been opened at either of said places in New York, where said drafts were-made payable, crediting or charging said Bell or West & Burget for any amount remitted as stated, or for receiving any funds arising out of said drafts themselves, or by any other-person or persons for the use of said Bell, except by the plaintiff. That all of said drafts beginning in the year 1851, and. up to the year 1855, including those of which copies are attached to the petition, were so negotiated, .under the arrangement before stated, with the full knowledge of the plaintiff and said Bell, that he neither had nor would have any funds in-New York to meet the same at maturity, and with the express-understanding that the same were to be paid at the counter of the plaintiff, in the manner stated, and that this was done for the sole purpose of extorting from said Bell the difference of exchange between Massillon and the city of New York, and as a device, scheme and contrivance, to obtain from said Bell, on said loan, usurious interest equal to the amount of said-! repeated differences, charged and received by the plaintiff and', paid by said Bell at the counter of the plaintiff. That the usurious interest thus charged and received and paid, amounted,, at the date of the mortgage attached to the petition, to more than $8000; that all of the drafts, copies of which are attached to the petition, and pretended .to be secured by said mortgage, are based upon, and composed of, and do not in the aggregate equal the usurious interest charged and received by the plaintiff during the continuance of the loan as stated, beginning in the year 1851 up to 1855 : that the amount claimed; in the plaintiff’s petition, constitutes the balance remaining unpaid on one and the same loan of about $8000, renewed as aforesaid. That the said drafts, of which copies are attached to the plaintiff’s petition, are all null and void, and that there is nothing equitably due on the same from said Bell to the plaintiff.
    That the plaintiff after making said loan and after the execution of said mortgage, applied to said Bell for payment of a pretended balance on said loan of about $8000, and that he with said Burget as surety, executed and delivered to the plaintiff their sealed bill for the plaintiff’s pretended claim against said Bell, and that the same was received by the plaintiff and given by said Bell in full satisfaction of said claim against him.
    That during the time said Bell was thus engaged in business with the plaintiff, under the agreement mentioned above, he used in his business nearly one hundred thousand dollars per annum in the aggregate, but that the whole was based upon a loan of the plaintiff, of about $8000, renewed at short intervals by new drafts or bills, for more than four years, and up to the time of said Bell’s failure.
    That in December, 1854, or January, 1855, there was paid out of Bell’s assets to the plaintiff, $4000, on the drafts mentioned in the petition; that said drafts were void for usury as before stated, the plaintiff being one of the branches of the State Bank of Ohio, and having received, in manner aforesaid, a rate of interest greater than that allowed by the law regulating said State Bank, and under which law the plaintiff had no power to make the contracts before mentioned, and that said $4000 was paid upon illegal and void drafts.
    That at and during the last term of this court, and on the day when the cause was set for trial, some of the officers of the bank corruptly and fraudulently combined with said Bell, and, by paying him $1000, and each of his attorneys $100, procured him to discontinue his defense in the case, and got from him a written statement (a copy of which is attached),allowing judgment to be taken against him, and from that tima ■said Bell made no further defense to the action.
    
      That said Bell was indebted to these defendants for claims on which the judgments were obtained, long before the execution of the plaintiff’s mortgage, described in the petition, and that, by said fraudulent and corrupt combination between the plaintiff’s officers and Bell, they attempted to defraud the defendants out of their rights secured by said judgments; and that said Bell is and has been insolvent for the last six years.
    The answer prays that the plaintiff may not recover anything by virtue of its mortgage lien, that the mortgage may be held satisfied, and that judgment may be entered against the plaintiff, for the $4,000, paid on said void contracts, and interest, and that the same may be applied fro rata in payment of the claims of the defendants, and for other proper relief.
    To this answer the plaintiff filed a demurrer, and for causes •of demurrer alleges:
    “ 1. That said answer does not, with sufficient certainty and particularity, state any ground of defense, claim or relief.
    “ 2. That the supposed or pretended usury taken by the plaintiff of P. Y. Bell, is not distinctly set forth, nor are the terms of the pretended usurious contract, and the quantity of interest or premium taken, or agreed to be given, distinctly and certainly alleged.
    “ 3. That said answer does not state in what manner or to what extent, or at what time, any usury was carried into or in any manner made to affect any or either of the bills or drafts, or the mortgage, on which this suit is brought.
    “4. That said answer does not distinctly and specifically allege, how, wherein, or to what extent, or when, the drafts on which this suit is brought, were resorted to as a device by said bank, for the purpose and with the intent of knowingly taking, reserving or charging a rate of interest greater than that allowed by the law regulating the State Bank of Ohio.
    “5. Because it nowhere appears that the plaintiff in any manner obtained said drafts, bills or mortgage by any ‘ shift or device ’ whatsoever, contrary to law, or by which the same are, or should be held to be, tainted with usury, or void for any ■cause whatsoever.
    
      “ 6. Because the above-named defendants have no legal right or capacity, as shown by their answer, and, the record-in this case, to defend in this action, in the manner alleged by them, or to set up any counterclaim, whereby the rights of the plaintiff under the judgment heretofore rendered in its favor in this case, can, in any manner, be impaired or overturned.
    
      “7. Because defendants are misjoined in their answer.”
    In this condition, the case was reserved to this court for decision.
    
      Underhill, Belden $ Frease for plaintiff.
    . Thurman ¡j¡¡ Schaefer, for defendants, Eenner and others.
   Brinkerhqee, J.

The questions which the ease now presents, arise upon the sufficiency of the answer — the averments' of which, so far as the same are well pleaded, the demurrer admits to be true. Seven causes of demurrer are assigned. The first four of them consist solely of an alleged want of definiteness and certainty, in the averments of matters of fact contained in the answer. Now, if the allegations of the answer were “ so indefinite and uncertain that the precise nature of the defense” was “not apparent,” the remedy is by motion to the court to “ require the pleading to be made definite and certain by amendment,” according to the provisions of the 118th section of the code of civil procedure. The indefiniteness and uncertainty of a pleading can not be remedied, or taken advantage of, by demurrer. Trustees, etc. v. Odlin, 8 Ohio St. Rep. 293; Lewis v. Coulter, 10 Ohio St. Rep. 451. Considering, however, the relations of the parties in this case, and that the facts alleged generally in the answer by way of defense to the action are, in their particulars, peculiarly within the knowledge of the plaintiff, we think that the same stringent rules, in respect to definiteness and certainty of allegation, ought not to be applied to the now defendants as there might properly be, if the minute facts generally stated by them in their answer were, from the nature of the case, as well known to them as they are to the plaintiff;' and we are, therefore, of opinion that even if a motion had been made for that purpose, the courts below would hardly have been required to compel the defendants to make the allegations of their answer more definite and certain.

The fifth cause of demurrer assigned seems to be intended .to deny that the answer makes out a case of usury against the bank.

The third section of the act of March 19,1850, “ to restrain banks from taking usury” (2 Curwen’s St. 1524), provides that “ it shall not be lawful for any banking institution in this state to charge, reserve, receive, or take more than six per centum in advance on the discount or purchase of any note, bill of exchange, or evidence of debt, payable at any place within the State of Ohio,” etc. And the fifth section of the same act provides, that “the discount, or purchase, by any banking institution in this state, of any note or bill of exchange on time, or other evidence of debt on time, payable at a place without the state, when the officer or agent of such bank knows, or has reason to believe, that the parties to such paper will not be prepared, or do not intend to pay the same at the place of payment, or when any device is resorted to in order to secure to said bank a greater profit than it would realize from the discount or purchase of such paper if made payable at its own counter, shall be deemed and held usurious and unlawful, within the meaning of this act.”

TV e think the averments of the answer make out a plain case of usury under these sections of the statute; and one which, avoids the paper in its hands tainted with the usury, and any mortgage given to secure it; first, because such usurious contracts are expressly prohibited by law; and second, because the bank had no corporate power to make them. Bank of Chillicothe v. Swayne, 8 Ohio Rep. 257. And by the second section of the act above referred to, any money paid to a bank on such a contract may be recovered back by the payor, and, in case of his neglect to sue for it, by the prosecuting attorney of the proper county, for the use of schools.

If a per centum “ charged as exchange, or any part of it, was intended as a cover for usurious interest, the form in which it was done, and the name under which it was taken, will not protect the bill from the consequences of usurious agreements ; and if the fact be established, it must be dealt with in the same manner as if the usury was expressly contracted for in the bill itself.” Andrews v. Pond, 18 Peters R. 65. “ The question in such case is, not what did the parties call it, but what do the facts and circumstances require the court to call it?” And “ collateral securities taken on a contract void for usury, are also void in the hands of the usurer.” Corcoran & Riggs v. Powers et al., 6 Ohio St. Rep. 19.

The sixth cause of demurrer assigned, denies the right and legal capacity of the defendants, who have filed the answer here demurred to, to interpose the defense of usury against the mortgage.

It is true, that the assignee of an equity of redemption, eo nomine, can not interpose the defense of usury against the mortgagee; because, having purchased the equity of redemption, and nothing more, he is presumed to have purchased, subject to the mortgage, and, by his contract with the mortgagor, to have assumed to discharge it; that being a contract which the mortgagor has a right to make, for he might waive the usury; and, under this presumption, when the purchaser of the mere equity of redemption has paid its price, and also discharged the mortgage, he has paid no more than the agreed price and value of the land, which includes both the amount represented by the mortgage and the price of the equity of redemption. But, against an assignee of the land mortgaged, as contradistinguished from an assignee of the mere equity of redemption, eo nomine, no such presumption arises; and he ■may set up the defense of usury against the mortgage when it is sought to be enforced. On these points the authorities are full and conclusive. Morris v. Floyd, 5 Barbour S. C. R. 130; Brooks v. Avery, 4 Comstock, 225. And the same rule applies not only in favor of purchasers proper, but in favor of assignees for the benefit of creditors. Beach v. Fulton Bank, 3 Wend. 573; Pearsall v. Kingsland, 3 Edwards Ch. R. 195. And not only assignees, but the judgment creditors, of the mortgagor, having a lien on the land mortgaged, may set up the defense of usury against the mortgage; and this though the mortgagor suffers a decree to be taken against him pro oonfesso. Post v. Dart, 8 Paige Ch. R. 639.

In the case before us, the defendants, who answer and set up the usury, are judgment creditors; but, as their judgments were obtained subsequent to the execution of the conveyance in trust for the benefit of creditors, there was no title remaining in the mortgagor on which a judgment lien could attach; and, therefore, if these defendants have a right to set up the defense of usury, it is in virtue of their being creditors simply, and beneficiaries under the deed of trust.

And we think they have such right. That the trustees under the deed of trust might set up this defense is clear. But they are mere trustees. They have 'themselves personally no interest in this controversy. The real and substantial interests involved are in the cestues que trust whom they are entitled to represent, and to whose benefit the defense, if made by the trustees, must enure. But the trustees in this case have failed to answer, and have thrown the. burden of the defense upon the creditors whom they represent. We can see no reason why those creditors should not be permitted directly to make any defense which the trustees might make for their benefit. Section thirty-five of the code of civil procedure provides, that “ any person may be made a defendant, who has or claims an interest in the controversy, adverse to the plaintiff.” These creditors have an interest in the controversy adverse to the plaintiff; they are, therefore, proper parties defendant; and the supposition that they are made parties defendant as an idle ceremony merely, and that being such parties, they may not avail themselves directly of a defense which would be available for their benefit if made indirectly through their trustees, seems to us to be wholly inadmissible.

The seventh and last cause of demurrer assigned, is, that the “ defendants are misjoined in their answer.” ■ On this point it is sufficient to say, that we know of no limit to the right of proper parties defendant to join in an answer, the averments of which they are able and willing to verify in accordance with the requirements of the code of civil procedure. And it may be proper to add, that these creditors of Bell are not precluded from making the defense of usury by force of the decree previously taken by consent of Bell against him; because if his consent to a decree against him could, under any circumstances, have such an effect, their rights are expressly saved by the terms of the decree.

This seems to dispose of the causes of demurrer assigned.

But, it is contended in argument that the giving of this mortgage by Bell, subsequent to the date of the drafts it was made to secure, and after one of them had matured and remained unpaid, was a setting aside and appropriation-of the land covered by the mortgage as a fund for the payment of these drafts, and so a waiver of the usury.

It seems to us that the mere fact of giving the mortgage after the maturity and default in the payment of one of the drafts, does not alone warrant the conclusion of a waiver of the usury, and, that the case is not different from what it would have been, had the execution of the drafts and of the mortgage been simultaneous acts. No case is cited where such a conclusion is drawn from such premises; and no waiver of the usury prior to the making of the trust deed is alleged in the petition or admitted in the answer.

It is furthermore argued by the plaintiff, that, as one of the drafts had matured and remained unpaid at the time of the making of the mortgage, the condition of the mortgage was broken as soon as made, that the estate of the mortgagee thereupon became at once absolute, leaving nothing but a bare equity of redemption in the mortgagor to pass to the assignees, under the deed of trusts; that neither the mortgagor nor those claiming under him could be permitted to redeem without doing equity by offering to pay the amount due exclusive of the usury.

To this it may be replied:

1. The cases already above cited show that where the mortgagor by the terms of his deed conveys the land, and not the equity of redemption merely, his assignee may set up usury in defense against the mortgage, although the mortgagor at the time of his conveyance, had in law but a bare equity of redemption.

2. Although formerly a party plaintiff in equity seeking affirmative relief against a usurious contract, would have been denied relief except on the condition of payment or tender of the sum due in equity, yet a party defendant and acting only on the defensive, could always setup the defense of usury against a party seeking, as the plaintiff here does, the aid of a court of equity to enforce a. contract tainted with usury, without any such condition. Nor can the fact that the condition of the mortgage was broken, and that the estate of the mortgagee had become absolute at law, prior to the making of the deed of trust by the mortgagor, have any significance here; for, in a court of equity, at least until after entry or foreclosure, a mortgage, whether before or after condition broken, is regarded as a mere security for the performance of its condition.

Demurrer to answer overruled, and cause remanded to district court for further proceedings.

Peck, C.J., and Scott, Ranney and Wilder, JJ., concurred.  