The judgment of this Court in this case, when it was here by a former appeal (Burwell v. Burgwyn, 100 N. C., 389), had reference only to the liability and rights of the feme appellant therein, who is the present appellee, and it was no part of its purpose to interfere with or modify, in any respect, the judgment of the Court below against Burwell Bros. & Co. in favor of the defendant, the present appellant, because they did not appeal. What the Court then said and directed to be done in respect to the usurious character of the contract-between the last named parties was with the sole view to settle the rights of the present appellee growing out of it.
The case cited supra settled, in effect, that the purpose of the appellee’s single bond and the mortgage of the land to secure the same, executed by her to the defendant appellant, was to secure the indebtedness due him from Burwell Bros. & Co. at the time she executed that bond, or that might so arise and come due thereafter, less any usury thereon paid or agreed to be paid. So that, under the re-reference directed, one material inquiry the referee was required to make was, *504when did such indebtedness, existing'at that time, first begin to exist? It appears that the dealings between Bur-well Bros. & Co. and the defendant began in 1882, and continued current, or nearly so, for several years, but the indebtedness arising was discharged, and renewed and discharged, from time to time, and very many times, until a further final indebtedness arose and continued to exist at the time, and after the bond and mortgage were executed. Such indebtedness so arising the appellee assumed liability for. While her liability should not be increased by exactions of unlawful interest pending the currency of her contract to secure to the appellant defendant the indebtedness of Bur-well Bros. & Co. to him, she cannot have benefit of such interest paid by them to the appellant, on account of former like indebtedness that had been discharged before her liability began. She had not obliged herself in any way to discharge such former indebtedness, and the interest paid on account of it did not affect her liability adversely, or concern her at all, in a legal or equitable point of view. Her right to be relieved as to the usury, rests upon the ground that it is unlawful, and she contracted, in legal effect, to be liable only for lawful interest. The contract between Bur-well Bros. & Co. with the defendant to supply them with money was continuous — current; but their indebtedness to him was not; as we have said, it arose and was discharged from time to time. If they saw fit to pay an unlawful rate of interest before the appellee’s liability began, as explained above, they had the right to do so; that they did, could not concern her, because she was not bound for such indebtedness; it did, however, concern her after she became liable, because she might have to discharge the indebtedness, and she was not bound to pay usury, or discharge the indebtedness increased by it. Pier engagement did not embrace unlawful interest, in terms, and, if it had done so to that extent it would not have been binding.
*505The judgment in this action against Burwell Bros. & Co. in favor of the defendant appellant, so far as appears, is valid, although it embraced some usury. This did not vitiate or affect its validity. They were insolvent, and, several months after the appellee’s liability began, two members of the firm transferred to the defendant a promissory note for five thousand dollars as collateral security for their indebtedness to him, and the maker of the note secured the ■same to him by a mortgage of certain real estate therein specified, which real estate was afterwards sold — part of it tinder a decree of the Court.
The appellee insisted, and the Court below held, that the proceeds of such sale of lands should be so applied as to reduce her liability, as above explained, on account of the judgment mentioned, because the judgment embraced unlawful interest that she was not bound to pay. In other words, the Court held that such proceeds should be applied only to discharge, in part, so much of the judgment as she was liable to pay.
The appellant contends, on the contrary, that he has the right to apply the proceeds of such sale, so far as the same may be sufficient, to the discharge of the judgment, unaffected by any right of the appellee, and we think his contention is well founded. The judgment was valid, and the judgment debtors had the right and were bound to discharge the whole of it, although it embraced usury. They might do so by paying cash, or they might devote any property, rights or credits they might have to that purpose, as it appears they did do to some extent, and the appellant had the right to accept such payment, or the security given, and that without regard to the liability of the appellee. The debtors had the right, without regard to her liability, to secure their indebtedness, in whole or in part, including usury, before the judgment wras given, and she had no right to compel them to pay or secure only the valid part thereof, *506if they chose to do otherwise. They transferred the note mentioned, which was afterwards secured by the mortgage of the land mentioned, to secure their indebtedness to the’ appellant, according to their contract with him; he obtained judgment against them for that indebtedness, including usury, and the proceeds of the sale of the land must be applied, so far as the same may be sufficient, to the discharge of the judgment, and without regard to the usury embraced by it. This is so, because the debtors so agreed to apply the note, or the proceeds thereof. No doubt, before the judgment was obtained against them, they might have availed themselves of the plea of usury, and thus have had the proceeds of the sale applied to the indebtedness, less the usury, but the judgment has put all question as to that out of the way. The whole indebtedness, including the usury agreed to be paid, has been merged in and rendered valid by the judgment as to Burwell Bros. & Co., and they, as they had the right to do, made the note mentioned collateral security for the whole indebtedness embraced by it.
There is error. The judgment must be set aside and the same referee directed to correct the account in accordance with this opinion, and further proceedings had in the action according to law.
Error.