Williams v. Reynolds

Le Grand, C. J.,

delivered the opinion of this court.

This suit was instituted by the appellees against the appellant on his promissory note. There is no question as to the genuineness of the note, nor of the ownership of it by the appellees. The defence set up is usury. The plea in the case is non-assumpsit.

The note was drawn in blank. By the testimony of J. Warden it appears, he is of the firm of J. & H. Warden, and that on the 27th day of July 1853, the appellant gave him the note in question. At the time the note was given Williams was indebted to the said firm to the amount of $52,828.08, and credit was given to Williams on the books of the firm, at the time of receiving the note, for its full amount. After the *64 note was given $2276.98 worth of wheat was purchased for Williams, and delivered to him by the firm; and they also paid drafts for wheat purchased for Williams in the county, to an amount not less than $8,113.99. The firm were making purchases of wheat for Williams nearly every day from the date of the note to its maturity. After the maturity of the note the account of the firm with Williams was presented to him, and in it was a credit for the full amount of the note with a charge of legal interest thereon. The account showed a balance due Williams of about $150, for which with the exception of a few dollars he subsequently drew on the said firm and was paid. The note was placed in the hands of a Mr. Coakley to be disposed of, the precise words of instruction given to him, the witness Warden does not recollect. Coakley reported to the firm that he could dispose of it at twelve per cent, in which proposition the firm concurred. Neither the firm nor any of its members endorsed the note, nor did they, or either of them, enter into any obligation to pay the note, or any part thereof, in any event whatsoever. On cross-examination the witness said, the note was given in order to pay part of the said Williams’ indebtedness to the said firm, but nothing was said about discounting it; the object in taking the said note, was to lessen the indebtedness of said Williams to the firm, and to raise money to purchase wheat for Williams.

The broker, Coakley, testified the note was handed to him by the Messrs. Warden before its maturity, and before such maturity, was by him offered to the appellees, and by them taken at twelve per cent. The proceeds were handed over to the Messrs. Warden. The appellees did not know from whence the note came. At the time of its delivery to the witness, the Messrs. Warden told him it was a legitimate one, and that Mr. Williams owed them the amount for money advanced.

We are of opinion, on the case as proven, that there was no such taint of usury in the transaction as to prevent the recovery of the holders of the note, and therefore, the 49th section of the 3rd article of the constitution is not in any way involved in this controversy.

*65 The proof is all one way as to the indebtedness of Williams at the time of the giving, the sale and maturity of the note. It shows he was indebted beyond its amount, and that he received from the firm a credit for its full amount. The question then is, did the purchase of the note before its maturity, by the appellee, at the deduction of twelve per cent., so impair their title as to preclude them from recovering its amount from the maker? We think not.

To render a contract usurious there must be a loan, either express or implied, and an understanding that the money loaned is to be returned. This is elementary law. In the 1st Yol.page 299, of Bouvier's Institutes, usury is defined as uthe illegal profit which is required by the lender of a sum of money, from the borrower, for its use. To constitute a usurious contract, the following circumstances are requisite; 1, a loan of money; 2, an agreement that the money lent shall be returned at all events; 3, that more than legal interest shall be paid. There must be a loan of money in contemplation of the parties, and if there be a loan, however disguised, it is sufficient; but a bona fide sale of a bill of exchange or promissory note is not usurious, although it may be sold below its value.”

In the case before us at the time of the delivery of the note to the Messrs. Warden, the consideration was full and complete, and continued to be so up to the time of its maturity.There can be no doubt if they had retained it until it became due they could have recovered its amount. This being so, then there was no usury in its inception. In the case of Cram vs. Hendricks, 7 Wendell, 569 , the whole subject is most fully and elaborately considered, and the rule there laid' down by the Supreme court of New York and affirmed by a majority of the Court of Errors is, that the transfer by the payee of a valid, available note, upon which when due, he might have maintained an action against the maker, and which he parts with at a discount beyond the legal rate of interest, is not a usurious transaction, although the payee on such a transfer endorses the note; and on non-payment by the maker, the endorsee may maintain an action against the endorser. In that case, the one of Munn vs. The Commission Company, *66 15 Johns., 44 , was reviewed and fully endorsed. It is also quoted with apparent approval by the Court of Appeals in the case of Sauerwein vs. Brunner, 1 Harris & Gill, 477. In commenting on it in Cram vs. Hendricks, Judge Sutherland on behalf of the court says: “That was an action of assumpsit, brought by the plaintiff, as endorsee, against the defendants as acceptors of a bill of exchange; it was endorsed to the plaintiff by Oliver Ruggles, the payee of the bill, at a discount greater than the legal rate of interest, and it was contended that this was an usurious transaction, and avoided the bill. The only doubt which the court entertained upon this point, was, whether the bill was available in the hands of Oliven' Ruggles, the payee, and whether he could have maintained a suit upon it 9 Judge Spencer, in delivering the opinion of the court, says; Upon a more careful examination of the case, we see no reason to doubt, that the bill, whilst in the hands of Oliver Ruggles, and before it was discounted by the plaintiff at a higher rate than the legal interest, was a perfect and avail-’ able bill, and that when it became due he could have maintained an action upon it, either against the defendant, or Herman Ilogers, the drawer. This, he continues, appeal's to the court to be the true test in distinguishing between a case where the discount of a bill at a higher premium than the legal rate of interest will render the transaction legal, by considering it the purchase of a bill already perfect and available to the party holding it, and where it will be illegal as an usurious loan of moneyT If this test be applied to the case before us there cannot be a doubt, that the note when passed to the Messrs.'Warden was a valid, available note, free from all taint of usury. The facts of it are stronger than those in the cases which we have quoted, for here the parties, to whom the note was originally given, did not endorse it, nor in any manner become responsible for its payment. They sold it, by their agent, without being known to the present holders as in anywise connected with the transaction. The’ case of Sauerwein vs. Brunner, in no manner conflicts with these princiciples; so far from it, the court there quote them and seemingly, at least, adopt them. That was a case where the note *67 was given as an accommodation and for the purpose of borrowing money at an usurious rate. Tbe note being iaiuted, from tbe very moment it became available as a note, with usury, and having been made before the passage of the act of 1824, chapter 200, the taint followed it, into the hands of a bona fide holder and debarred him from recovery.

Although the transfer of a noto is inquirable into, that is, whether it be a bona fide sale, or merely a device to evade the statute of usury, and the question submitted to a jury where there are circumstances independent of the transfer to excite suspicion of an intent to evade tbe statute, yet, there always must be some evidence to justify the court in submitting such inquiry, fox, prima facie, the transaction is bona jide. in the case before us, there is not a particle of testimony to go to the jury to show the existence of usury in the inception of the note, nor of an intent, on the part of the Messrs. Warden, to evade tbe statute. We have said nothing' of the pleadings in the cause, no question having been presented in regard to them in the court below. Entertaining these views, we, of course, approve of tbe ruling of the Circuit court in regard to each and all of the prayers, and accordingly affirm the judgment.

Judgment affirmed -