This action comes into this court on error to the common pleas court of Cuyahoga county, and the issue to be decided is between the plaintiff in error, William P. Bittner, Clarabel K. and Celina Bittner, who were the heirs at law of C.C. Bittner, deceased, and defendants in *Page 195 error, Fred S. Jones and Carrie M. Jones, his wife, and the question involved is a peculiar one and of much importance.
It seems that Fred S. Jones was the owner of an apartment house on Lake avenue, somewhere near Cove avenue, in Lakewood, Ohio, and that he had mortgaged the property to a first mortgage holder, the Midland Mutual Life Insurance Company, but whose name for the purposes of this case is unimportant, for the sum of $30,000, and that, thereafter, desiring to increase the loan upon this real estate, he came in contact with one C.C. Bittner, then in this life, of Sandusky, Ohio, and the negotiations resulted in making the note and mortgage to Bittner in the sum of $14,000, about $4,000 of which seems to have been bonuses and usury. This ran along for a number of years, and bonuses were paid each year at which time payment of the note was extended, the mortgage remaining intact, and finally, when Bittner died, the mortgage and note secured by it was ordered distributed in kind to William P. Bittner, Clarabel Bittner and Celina Bittner, the three heirs of Bittner, and was so assigned by the administrators at the direction of the probate court and approved by the court. Thereafter they became the owners and holders of this note and mortgage in equal proportions, and apparently they carried on the same method that their father had done before them; that is, they extended the time of the payment of the loan upon the payment of a bonus for the ensuing year.
At the time this mortgage in question was given, there was, as already stated, a first mortgage of $30,000 and this second mortgage in the sum of *Page 196 $14,000, when Jones wished to increase his loan upon the property, and for that purpose approached William Bittner, who was acting for himself and the other two heirs, and proposed that they waive their mortgage in the sum of $14,000, to another mortgage of a like sum of $14,000, so that, instead of there being $30,000 ahead of the Bittner mortgage there was approximately $45,000. The Bittners, strange to say, consented to this arrangement. Apparently, from the record, nothing was said about the amounts that afterwards were claimed to be bonuses, which were incorporated in the note; no question was raised by either Jones or the Bittners. Of course, the Bittners would not, and, probably, under the circumstances, Jones would not either, refer to the amount of bonuses included in this mortgage. A new mortgage was made to the second mortgage holder for $14,000 or $15,000 which was prior to the mortgage that was afterwards given to the Bittners, their mortgage given to their father having been canceled of record; and then, in order to give each distributee his property so that each, instead of having a share in one note, would have a portion of the note that was properly his or hers, a mortgage was given and three notes, the total amount of the three notes being that shown to be due on the face of the C.C. Bittner mortgage. A note was assigned to each one of the Bittners to whom the probate court had ordered a distribution of the estate, and a new mortgage was made to secure these three notes. That mortgage was made to a person by the name of E.M. Court, who was an employee in the office of Fred S. Jones, who, by the way, was the same person who was the grantee *Page 197 named in the mortgage from Jones that afterwards was assigned to C.C. Bittner.
Immediately after this mortgage was made to E.M. Court, it was assigned and transferred to the Bittners to secure the three notes. Ultimately, an action was brought in the court of common pleas to foreclose the first mortgage, and the Bittners were made parties, and they set up their claim for the face of the mortgage and the notes that had been given to them after the $14,000 had intervened between their mortgage and the first mortgage, which they had waived, as already stated. Jones then pleaded usury, and at the trial in the common pleas court the sum of about $4,000 was deducted from the face of the notes and mortgage because the original transaction had been tainted with usury. One may say in passing that not only had the original transaction been tainted with usury, but usury had been in the subsequent transaction.
In other words, in the three notes and mortgage that had later been given to the Bittners there was usury, and counsel for the Bittners agreed that that should be deducted from the face of the claim, so probably that matter is not in dispute, but the Bittners claim that, so far as the original transaction is concerned, it had been settled and paid by the substitution of the new mortgage and notes; that to all intents and purposes the old mortgage had been paid, so Jones could not raise the defense of usury to the original transaction. But that was not the view that the common pleas court took of it, nor is it the view that my associates take of it. I cannot agree with the view of my associates, however, *Page 198 and therefore feel it my duty to dissent and to put my views in a proper light.
Now it is admitted that, had Jones paid the money at the time of the waiver, it would have been irrevocable and he could not have afterwards recovered it; but Jones says that, if this usury was not carried into the new transaction, it must have been proved by the Bittners that there was an agreement that the usury had been properly disposed of, and that it was agreed that the defense of the usury should not be raised in the new transaction.
Now, let us see how that goes. If Jones had resisted at that time the payment of this note, if there had been a foreclosure at that time, and the same defense was set up as is now set up, Jones undoubtedly would have had a set-off on this note to the extent of the usury, or about $4,000.
If he wanted to do that, he could and should have exercised his right then, and that would have given the Bittners the right to say, "Well, in case you don't allow us the full amount of the claim to father, which has been distributed to us, we will refuse to waive our right in favor of an intervening mortgage," and they would have been within their rights, and then undoubtedly Jones could have insisted upon having a reduction made on the amount of the Bittners' mortgage, and in that event they would have a $10,000 mortgage which was inferior only to a $30,000 mortgage. So by Jones not saying anything about it — of course the Bittners would not say anything about it; Jones did not say anything about it because undoubtedly then the Bittners would have refused to waive in favor of the $14,000 mortgage — the old note which was tainted with the *Page 199 fraud was surrendered, and it was a new transaction based upon a consideration to waive and postpone a $14,000 mortgage, or a $10,000 mortgage, as you look at it, to an intervening mortgage of $14,000 or $15,000, making the Bittner claim inferior to a $45,000 instead of a $30,000 mortgage.
Now, if Jones had insisted upon his rights at that time, the Bittners could have gotten at least their $10,000. Now they have waived in favor of another mortgage of $14,000, and their mortgage, whether it was $10,000 or $14,000, is postponed to a $45,000 mortgage; and they may succeed in getting nothing, for by their kindness and courtesy they are probably destined to lose the entire loan. Therefore I think the situation of these parties is so changed that the original transaction has dropped out of the picture, and it is a new transaction entirely, as much so as if Jones had paid the claim and borrowed the money of a third party. In that event the usury in the original transaction could not be traced and attached to the new deal, although there is no more money loaned upon it; and for all intents and purposes, in my judgment, there was a new transaction; there was a new mortgage; there was a new consideration; there were new parties; and it was after this claim had been allowed, after the probate court had ordered a distribution of the property in kind; and it comes too late for Jones to raise the question of usury to C.C. Bittner then, or after the changed circumstances of this property by reason of the intervening mortgage.
I therefore feel that the court below was wrong, that the judgment should have been for the full amount of the note, less the usury that had been participated *Page 200 in by the cross-petitioners, the Bittners, in this second and subsequent transaction; and for that reason I am compelled to dissent from the judgment of the majority of the court in this case.