Case ID: hill_2/html/0499-01.html
Source: Caselaw Access Project
Author: {"author": "Nelson, Ch. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

W. & J. J. Rockwell vs. Charles, impleaded, &c.
    Illegality of consideration of a bill or note is no defence to an action by a bona fide holder without notice who received it before maturity and in the usual course of trade, unless the paper be expressly declared void by statute.
    Accordingly, held, that a promissory note given for the loan of bills or notes issued by the city of Rochester without authority and in violation of its charter, was valid in the hands of a bona fide holder who received it before due and without notice.
    The loaning of bills or notes issued by the corporation of a city is not illegal or necessarily immoral, unless the circulation of them be prohibited by law.
    In an action by a bona fide endorsee upon. a promissory note given for the loan of ° bills or notes issued by a city corporation at their nominal value, but which were from three" to five per cent, below par; the borrower having declared when the loan was made, that this corporation paper would answer his purpose as well as current money: Held, that the judge’s refusal to charge the jury, as matter of law, that the note in question was usurious, was right; but, semble, he should have submitted the point to the jury as a question of fact, had he been requested so to do.
    Assumpsit, tried at the Monroe circuit, in September, 1840, before Willard, C. Judge. The action was on a promissory note for $181,86, dated February 27th, 1840, made by Charles, and payable to the order of Boswell, (by whom it was endorsed,) at the Bank of Monroe, on the 14th of March then next. The evidence given at the trial disclosed the following facts: Boswell loaned Charles $300 in bills or notes of the corporation of the city of Rochester, on his promissory note of that amount at sixty days payable in current money. A part of this note was paid, and the note in question given for the balance. At the time of the execution of the first as well as the last note, the corporation bills were at a discoúnt of from three ‘ to five per cent.; but Charles said, when the loan was made, that they would answer his purpose as well as current money. The note in question was passed to the plaintiffs in the usual course of business, before due, and for a full consideration. The defendant’s counsel requested the judge to charge, 1. That the note was usurious; 2. That it was void, having been given for notes issued by the city of Rochester without authority, and which could not be enforced against the corporation. The judge declined so to charge, and the defendant excepted. Verdict for the plaintiffs. The defendant now moved for a new trial on a case.
    
      H. Gay, for the defendant.
    
      C. M. Lee, for the plaintiffs.
   By the Court,

Nelson, Ch. J.

Whether the notes of the city of Rochester, which formed the consideration of the loan for which the note in question was given, were issued for circulation as money, does not distinctly appear. It is alleged that they were issued without authority, and in violation of the city charter; and the question is, whether, assuming this to be so, the plaintiffs, who are bona fide holders for value, are entitled to recover.

I shall not stop to examine the question as to the validity of the city notes, and whether or not they might have been collected of the corporation; for no rule of commercial law is better settled, or more rigidly adhered to, than that the illegality of consideration of a bill or note will not invalidate it in the hands of a bona fide holder if taken in the usual course of trade, unless made void by statute. Mr. Chitty says: “ In those cases in which the legislature has declared that the illegality of the contract or consideration shall make the security, whether bill or note, void, (enumerating several cases,) the defendant may insist on such illegality, though the plaintiff, or some party between him and the defendant, took the bill, bona fide and gave- a valuable consideration for it.” “ But unless it has been so expressly declared by the legislature, illegality of' consideration will be no defence in an action at the suit of a bona fide holder, without notice of the illegality, unless he obtained the bill after it became due.” (Chitty on Bills, 115, 116, 9th Am. from 8th Bond. ed.; Chitty, jun. 100; Broughton v. Manchester Water Works Co., 3 Barn. & Ald. 10, per Holroyd, J.) The rule is the same in this state. (Vallett v. Parker, 6 Wend. 615.)

In this case there was no illegality shown between the original parties to the note. There is no law, either statute or common, which forbids the holder of corporation notes like those in question, from parting with them. They may have been void and of no value, and thus have afforded no consideration for the paper received; but we were referred to no law, nor am I aware of any, that characterizes the act of loaning them as illegal, or even necessarily immoral, and both parties may have supposed the notes valid and binding upon the city. In order td establish illegality, the counsel should have produced some law prohibiting the circulation of these notes; and even then, as we have seen, the note in question would have been good in the hands of the plaintiff, unless that law expressly declared the security taken to be void.

The learned judge was also right in refusing to charge the jury that, as matter of law, the note was void on the ground of usury. Perhaps he might have been bound to put the point to them as a question of fact, if he had been requested to do so ; but the weight of the proof was decidedly with the plaintiffs. It is true, the city notes were from three to five per cent, below par; but the defendant sought the accommodation on the ground that they would answer his purposes the same as current funds. Indeed, the whole case negatives any intent on the part of the lender to gain a usurious advantage in the transaction.

New trial denied.