Whitehead vs. Peck.

opinion-Peck saying that he would have nothing to do with Whitehead, when applied to by Bunn to get the money,) discharged the debt to Peck with a full knowledge of its original turpitude. He had ample notice of the taint which attached to it. He did it without compulsion of law. If there be guilt in the transaction, he is completely identified. with it-in its inception-in its consummation. That Whitehead might have resisted a recovery, at the instance of Bunn, I am quite clear; notwithstanding the decision in Ford vs. Keith.—1 Mass. Rep. 139. That he might not still have recourse on Bunn, if the facts of his case do not otherwise bar him, I am not fully convinced.-See Reed vs. Smith, 9 Cowan's Rep. 647; Kent vs. Walton, 7; Wend. Rep. 257. But that he has sought his remedy of the wrong person-of one to whom he never paid a dollar, either personally or by attorney-is the deliberate judgment of this court, after the most thorough reflection upon the case.

But it is urged, and with much plausibility and earnestness, that Bunn acted as the agent of Whitehead, in the settlement of the debt; and this is implied from the fact of his securityship. But Bunn himself, in his testimony, expressly repudiates the agency; and does not every feature in the transaction corroborate his proof? Does he not demand reimbursement at the hands of his principal? And does not this fact negative the imputed relationship? Did he not assert his rights as mortgagee, upon forfeiture of the condition in these instruments to protect him as security? And does Whitehead attempt to oppose his claim, upon the pretext that he acted merely as his substitute in the transaction? On the contrary does he not recognize and discharge it by a surrender of the property? And this position is greatly strengthened by the very ingenious suggestion of the learned counsel for the defendant, namely: that Bunn's remedy by assumpsit against Whitehead, for money paid, was merged in the higher security, by mortgage; and that the settlement of that specialty debt by Bunn and Whitehead, in property, could have had no legal connection with the settlement of the simple contract debt between Bunn and Peck. I think there is no foundation, from any rule of law so to consider it.-2 Term Rep. 100; 8 Taunt. 365.

But, surmounting all those obstacles, the plaintiff in error, I think, must fail for want of the necessary privity between himself and Peck, to enable him to maintain his action. It is unquestionably true, as a general rule, that a stranger to an agreement cannot sue in his own name.- Williams vs. Everett and others, 14 East. Rep. 582. But there are exceptions to the rule; and it has been decided that it is immaterial from whom the consideration passed, if it be a sufficient foundation for a valid promise. If A delivers money to B for the purpose of being paid over to C, C may maintain an action against B for the money. The person to whom the promise is to be performed, though not the party contracted with, being the meritorious cause of it, can take advantage of the promise.-Con. Rep. 443; 3 B. and P. 149, n. (a); 2 D. and R. 277; 4 B. and C. 664; 17 Mass. Rep. 575, 579; 3 Pick. 92; 13 John. Rep. 497; 22 Am. Jur. 16, 19; Chit. on Plea, 5; Chit. on Con. 45, 48; Ham. on Par. But the obvious answer to all those 8, 9; Story on Agency, 393, 394.

cases is, that the money, or property, sued FOR belonged to the plaintiff. It must be proved either that the plaintiff was the person with whom the contract was made, or that he was the party legally and really interested

Whitehead vs. Peck.

in it when made.-1 East. 497; 8 T. R. 332. Plaintiff having an equitable interest in the contract is not sufficient; therefore a cestui que trust cannot sue.-Allen vs. Jenlett, Holt, c. 641. Money deposited with a stakeholder can only be recovered from him by the person legally entitled thereto.-13 East. 20. The plaintiff, Whitehead, had no legal right to the money paid by Bunn to Peck. In one sense, it is true that it was paid to his use, as it was appropriated to the joint note of Whitehead & Bunn, but not to his use, in the meaning and spirit of the foregoing cases. Whitehead had no agency nor participation in the transaction between Bunn and Peck. As to the idea that the subsequent settlement, upon the mortgages, was a ratification and adoption of the previous agency, installing Whitehead into the shoes of Bunn, and thereby constituting him the creditor of Peck-the fallacy of it, as I humbly conceive, lies in identifying principal and surety with principal and agent; relations which, in point of law, are very dissimilar. Agency must be antecedently given, or be subsequently adopted; and, in this latter case, there must be some act of recognition.—2 Kent Com. 614. But where the act of the agent is intended to affect a third person, it is necessary to prove an express authority given to the agent at the time he acted, and no subsequent sanction of the principal will give it effect.-5 East. 498; 3 Chit. Com. L. 206. The rule of law, that omnis ratihabitio, retro trahitur, &c., seems only applicable to cases where the conduct of the parties on whom it is to operate, not being referable to any agreement, cannot, in the mean time, depend on whether there be a subsequent ratification.-5 East. 500. A person, by an assumed agency, and without any assent or acquiescence to the act, cannot bind another, nolens volens, however useful and necessary the act may be. But a surety has a right to see to it that the debt for which he is bound is paid. And if he satisfies the creditor, to relieve himself, which he may do without the consent of his principal, still it is money paid for his use, to recover which an action will lie. Does the relation of principal and surety create such an agency that the acts and admissions of the latter would bind the former, though he should subsequently so far confirm the deed of his surety as to refund the money paid on his account? Numerous other points of dissimilarity might be adduced, but we forbear.

The court is of the opinion that as neither principal nor security was bound to pay the excess of interest, Bunn, by voluntarily paying money upon a usurious agreement, which he himself had negotiated, could not compel Whitehead to refund. It could not be money paid to the use of the principal, as Bunn paid it with a full knowledge that it was illegal. That without notice from his principal, forbidding its payment, he was under obligation at his peril to resist it. And without expressing any opinion as to what might have been the rights of Whitehead as against Bunn, had the payment to him been in money and not in property, we hold that Whitehead cannot maintain assumpsit against Peck, for money paid to Peck by Bunn, and which it is not pretended was the money of Whitehead, merely because Whitehead afterwards discharged, in property, the liability imposed upon him by operation of law in favor of his security. No precedent has been produced to warrant such a proceeding.

Wherefore the opinion of the court below must be affirmed.

Whitehead vs. Peck.

NISBET, Judge.

Upon the question made in this case, very little direct authority is to be found. It is to be decided, therefore, upon general principles The court being compelled to give judgment at Hawkinsville, before the expiration of the Term, and having then access to but few books, I felt great doubt as to the correctness of the judgment rendered. That doubt was strengthened by the dissentient opinion of my learned brother, Warren. Since I have had an opportunity of looking into the subject with some carefulness, I have become reconciled to the judgment, and although there is obviously in the case some conflict of principles and authorities, I must think the judgment of the court was right-right both upon principle and authority.

The facts are few. Whitehead, the plaintiff in error, through Bunn, who was his surety, negotiated a loan from Peck, the defendant, at usurious interest. Before the maturity of the note, and with knowledge that it was tainted with usury, Bunn paid it in full to Peck. He was at the time secured against loss as surety, by a mortgage from Whitehead, his principal. After payment to Peck, Whitehead reimbursed Bunn in property. These facts establish that the contract was usurious; that Bunn had knowledge of that fact, and that the payment by him of the usurious interest was voluntary. Whitehead brought his action of assumpsit, for money had and received, against Peck, for the usurious interest paid by Bunn. The question is, is he entitled to recover? I think he is not. This I know is an equitable action, and is extensively remedial, yet it is subject to rules. It does not give to courts of law jurisdiction which belongs to courts of equity. It lies in a great variety of cases, but in no case where there is not a contract, express or implied, between plaintiff and defendant; and there must be such a contract as creates a privity between the parties. It does not lie to enforce every imaginable equity, between man and man, growing out of moneyed transactions. It lies in all cases where money is in the hands of another, which ex æquo et bono, the plaintiff is entitled to recover, and which the defendant is not entitled, in conscience, to retain. Yet this good and just right in the plaintiff, and this conscientious inability in the defendant, grow out of privity of contract, either express or implied, in law.--1 Wheat. Selwyn. 103; 14 East 582; 4 B. & Ad. 612; 1 Cr. & Jor. 83 ; 17 Mass. 579; 7 Taunt. 339; 1 R. & M. 68; 3 R. & A. 643. Between Whitehead and Peck, there is no express contract. any implied in law? In cases where the borrower pays the usurious interest himself, the statute against usury, and the fact of payment, create a contract. There is in the transaction a direct relation between the parties, viz: privity. The money is paid by the plaintiff, and is received by the defendant for his use. It is the money of the plaintiff which he holds, and it being received, against the statute of usury, he cannot retain it in conscience. Ex æquo et bono, the plaintiff is entitled to it. In that case, the borrower could certainly recover. Upon the note, there is a contract between Whitehead the maker, and Peck the holder, so long as it remains in his hands. But so soon as the surety steps in and pays the debt, Peck is entirely dismissed from it-his rights in it cease, and

Is there

Whitehead vs. Peck.

the surety is subrogated to all the rights of the holder. This position is not necessary to be sustained by authority; so that the payment by the surety, so far from creating a privity between the maker of the note and the holder, does in fact destroy that which before existed. It does more: it creates new relations between the surety and the holder, incompatable with the plaintiff's right to recover. There is a contract implied in this case, between the surety and the holder, by virtue of the statute and the fact of payment; a direct relationship which constitutes privity. It is the money of Bunn, the surety, which Peck has received, and he has received it to Bunn's use. The unconscientiousness of the retention of it, has reference to Bunn, and not to Whitehead. The indebitatus is as to him, and it is to him that the law makes the assumpsit. What reply could Peck make to an action for the usurious interest by Bunn? I know of none which would be available. Bunn, if sued by Peck, the lender, on the usurious contract, could plead the usury, (Blydenburg, 107,) and if so, having paid it voluntarily, he can recover it back in an action for money had and received. It would not be competent for Peck to plead that Bunn had been reimbursed by Whitehead. He would not be permitted to go out of his own contract with Bunn, and inquire into his (Bunn's) relations with his principal, for a defence. If Bunn, being reimbursed by Whitehead, should still recover, the usurious interest out of Peck, what then? Why, then an action would probably lie for it against him in favor of Whitehead. Whitehead would at all events have an equity in this money, which he could assert in chancery or at law. Now, can the payment of the money create, by implication, two contracts at the same time? Can this usurious interest be recovered both by Bunn and Whitehead? Is Peck liable to Bunn, and if he is, is he also liable to Whitehead? Can he be liable to both, at one and the same time? I apprehend he cannot be. And this view of the matter satisfies me that there is no contract, no privity, between Whitehead and Peck, and that the former ought not to recover against the latter. If this question be tested by the rules of pleading and evidence, 1 cannot perceive how the plaintiff could ever make out his case against the defendant. The facts do not expressly, or by implication of law, create an assumpsit on the part of Peck. Without that, the action of assumpsit cannot be sustained. Again, one of the first rules of pleading is, that the action shall be brought by him who holds the legal interest in the contract. If I am right in my view of the subject, Bunn, the surety, has the legal interest here. The plaintiff by his own evidence has shown this, according to my view of this record, and has therefore proven himself out of court. It has been stated already that a surety, having paid the debt of his principal, is subrogated to the rights of the creditor against him. He cannot, however, be subrogated to more than the creditor's rights. The creditor could not have recovered the usurious interest from the maker, if he (the maker) had plead the statute of usury, in an action upon the contract. Could, therefore, Bunn have recovered this excess of interest out of Whitehead, his principal? Was it not his duty to have awaited a suit, and plead the usury? Knowing, as he did in this case, that the contract was tainted with usury, was not this necessary to his own protection? And was not his voluntary ayment of the usury an act of his own wrong, which would prede him from recovering it from his principal? We have seen that

Whitehead vs. Peck.

the surety may set up the defence of usury. In a case like the present, where the surety is cognizant of that defence, it strikes me that he fails to make it at his peril.

It

The rights of the principal are involved. The surety had no right by a voluntary payment to charge his principal with usurious interest. was competent for him to protect him, and it was his duty to do it. Suppose that Whitehead had not refunded to Bunn the illegal interest, and he had sued Whitehead for it, could not the latter have plead Bunn's knowledge of the usury in the contract, and his obligation to have set it up in defence against the creditor? It is so decided in several instances, and decided contrary wise in one case in Massachusetts. Blydenburg holds this language, upon the authority of what is called Potkin's case, 8 Leonard, 63; to wit: "But it seems that if the surety of the borrower at usurious interest have an opportunity to make his defence in a suit upon the original usurious bond, and omit to plead, he cannot afterwards recover of the borrower upon his counter-bond of indemnity, but shall be punished for his neglect."-Blydenburg, 102. In Cro. Eliz. 588, a precisely similar case was decided contrary, but upon the ground that the surety might not have known of the original contract being usurious, in time to make his defence, sustaining the position, that if he had known of the usury in time to plead it, he could not have recovered against his principal.

Justice Glanville, upon the authority of Noy, is reported to have said, "It would be a dangerous precedent to avoid the statute of usury; for the surety might be a friend of the usurer, who would not plead the statute, and so the statute would be to little purpose.-Blydenburg, 102; Noy, 73. It is something more than surmised that in this case the surety was the friend of the usurer. The writer on usury, Blydenburg, before quoted, remarks that the principle of Potkin's case has been followed in the United States. It was followed in Moore's Exrs. vs. Vance, 3 Dana, 362. In Ford vs. Keith, 1 Mass. 139, it is decided that the surety may recover against the principal the usurious interest voluntarily paid. In this case, the counsel for the plaintiff in the argument put his right of recovery on the ground that he had no notice of the usury, and therefore could not have plead it. The court, however, ruled that with or without notice he could recover. It does not seem to me that this authority is consonant with reason; it is in conflict with the common law. Now, if I have shown that Whitehead might have successfully defended himself against the recovery of the usurious interest on the part of the surety, it follows that his voluntary refunding it to him, was an act in his own wrong from which he can take no benefit; and it farther results as a consequence of this wrong act, that he has no equity against Peck, the lender. It is not true, ex æquo et bono, that he is entitled to this money at the hands of Peck.

But it is argued that this case turns upon the doctrine of agency; that Bunn acted in paying the debt as Whitehead's agent, and therefore it is his act; that a subsequent ratification is the same with a prior appointment, and that the maxim "omnis ratihabitio retro trahitur et mandato priori æqui paratur" applies. The doctrine of ratification is not questioned, but it is not apparent how the law of agency can govern this case. If, indeed, Bunn was Whitehead's agent, the privity is established, and