Case ID: scl_14/html/0365-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Johnson, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

King & Jones ads. Sarah Johnson.
    it is cot usurious to sellorbuy a negotiable paper, founded on a legal consideration, lor less than its nominal value.
    So where a note was given for money advanced, to be returned to the drawer when he should pay a debt to which the drawee was security for him, and the drawee indorsed the note and traded it off before it became due at more than the rate of legal interest, it was held not to be void in the hands of an innocent holder,
    it seems the transaction would not have bee.n usurious in the hands of any body, as the original consideration was legal.
    Where a note, on-ft legal consideration, is .drawn to order, and indorsed, no matter how often it has been polluted in the hands of intermediate holders, it is still valid in the hands of a bona fide holder.
    This was an action of assumpsit on a promissory note. The indorsee against the drawers. Tried before the recorder of the City Court in JulyTerm, 1825'
    The note in this case was drawn for $862 80, by the defendants in favor of James G. Brown, and by James C. Brown, indorsed to the plaintiff, dated 20th November, 1823, payable seven months after date. The defence was usury.
    Myer Moses, proved that James C. Brown bought certain sugars from Edmondston, which he bonded at the custom-house; that John King, one of the defendants, became the security of Brown in two bonds which he gave for the duties upon the sugars; that in consideration of King’s, becoming security, it was agreed between Brown and himself, that he should have the use of one half of the amount payable for the duties; King stipulating when the bonds became due to pay one half of the sums for which they were given. The bonds became due in six and nine months, and Brown, upon King’s subscribing the bonds, gave to him one half of their amounts. King at the same time delivered to Brown the promissory note of King 8s Jones for the same sum as a memorandum of the transaction. The agreement between King te Brown, was, that if King paid one of the bonds, the note of King 8s Jones was to be returned to him; but if King did not pay one of the bonds, then he was liable to the payment of the note. King did pay one of these bonds to the knowledge of the witness. Joshua Brown, the father of James C. Browo, attended to, and transacted all the mone y concerns of the latter. When Joshua Brown, was in his last illness, the witness called upon him. and asked him about the note of King & Jones; Joshua Brown told the witness, his necessities compelled him to part with the note. The witness said, he ought not to have done so. Joshua Brown replied, that King should never suffer from it. Moses also said that all the business carried on in the name of James C. Brown was conducted by Joshua Brown.
    Charles O’Hara deposed that he first saw this note in the hands of Joshua Brown; that Brown told the witness, he had loaned the amount of the note to King and received from him the note in payment. The witness enquired particularly into the transactions, because he knew King would take advantage of it, if he could. The witness had the note once or twice in his possession before it was indorsed to him. When it was indorsed to him he paid the money for it, but does not recollect how much. The note was received for money lent to Brown, for which no premium was retained» When the note was delivered to the witness, he loaned Brown $500, and upon this sum being returned with an interest upon it exceeding 7 per cent, per annum; the-witness agreed to restore the note to Brown. When Brown died, he owed the witness from ‡ 1200 to 1500; the witness had various money transactions with Brown, and they were all upon a promise of Brown to pay to the witness an interest exceed mg 7 per cent, per annum. The note was indorsed to the plaintiff long before it was due, at least 80 days previously. The witness lodged the note in the bank for collection, as a broker, as is frequently done, but merely as the agent of the plaintiff whose property it was exclusively. The witness received bank stock in payment for this note from Dr. Johnson, the plaintiff’s agent. Hr. Johnson was ignoran of any usury i the trans* action. The witness believed he allowed upon the transfer of stock to him something above the market price, but this was only the customary difference between the cash and a note which had some time to run. The business of James O. Brown was carried on by his father, Joshua Brown ; but Joshua Brown, did not indorse his son’s note. King acknowledged to the witness that he had given this note for money received by him from Brown. He never objected to pay the note during the life-time of Brown, but did after his death.
    The counsel for the defendants produced the other bond given for duties by Brown and King, • and also King’s account, as assignee of Brown, to shew, that only one bond, had been charged to J C. Brown, and to prove that a balance of upwards of ‡ 1,100 were due to him as assignee.
    The plaintiff’s counsel contended that as the note was a. fair negotiable note in.its origin, and given for a valuable consideration, no subsequent act could vitiate it in the hands of an innocent indorsee, and if there was any us.ury in the transaction, it was confined to Broivn, by which the plaintiff could not he affected. He quoted 1 Comm: on Co'n’ts 40. 3 Johns, cases, 206;, 1 Bay 479. 15 Johns. R. 44 55. 15th Mass. T. R. 272. & Orel on Usury 110. '
    His Honor after recapitulating the testimony and stating the law. which seemed to him to be applicable to the case, charged the jury, that in his qpinion, the defence of usury had been fully made out.
    The jury found a: verdict for the plaintiff.
    The defendantnow appealed on the grounds :
    1st That the note declared on was not obligatory or binding, but was inceptive merely until James.. C. Brown put his name on it and delivered it to O’Hara for an usurious consideration, and for this reason the note was usurious in its formation and commencement, and, therefore, void.
    2nd. If the note be opt void, then was it contended that the endosement was void, and the plaintiff bad no right to sue. For which reasons,-it was submitted, the court would either grant a aew trial, or. nonsuit the. plaintiff.
   Johnson, J.

1st. The conclusion that the note was only inceptive, until endorsed by the payee James C. Brown,' which is made the foundation of the first ground of the motion does not appear to the court to be warranted by the evidence. The consideration on which it was founded, (the money placed in defendant’s hands) was adequate, and whatever equities might have arisen as between themselves, out of the con-; tract to deliver it up on defendants paying one of the bonds, the note was transferred before it came to maturity, and it follows as a legal consequence, that the plaintiff, an indorsee withontmotice, is entitled to recover, unless indeed it is contaminated by the .supposed corrupt agreement on which it was transferred by Joshua Brown to O’Hara.

2nd. About the facts which relate to this matter, there is no difficulty. The note was endorsed in blank by the payee James C. Brown, and it» that situation, it was transferred by Joshua Brown to O’Hara, and by him to the plaintiff, '-both without further endorsement. The sum paid by Q’Ha~. ra, in consideration of the transfer to him, did not equal the nominal value of the-note by an amount far exceeding the legal rate of interest for the time which it had io run; and it is now contended in support of the second ground of the motion, that this contract was against. the statute of usury, and therefore void; and, hence, it is concluded, that the plaintiff having derived her interest from this corrupted source is not entitled to maintain her action. Courts of justice have universally laboured to untrammel the restraints on the circulation of negotiable paper as indispensably necessary to the existence of commerce. They constitute, indeed, the mainspring, .the very sinews of all commercial enterprise, and without them all its operations would be greatly impeded, if not wholly obstructed, and hence the great patronage which the law extends to them; and it may be safely laid down as a good general rule, that the innocent holder of a.negotiable paper transferable by delivery may maintain an action against the maker, however it may have been polluted by the - immediate hands, through which it passed ; as where one had obtained possession of it by fraud and circumvention, or even by theft, a bonajide holder without notice may main - tain his action upon it.

There are, however, a few restraints imposed by positive regulations growing out of political experience, among whichgcontracts founded on usurious considerations, which are by the statute declared to be void, are perhaps the most prominent; and it will not be controverted, that no contract based on such considerations will confer the right of action, either in the parties themselves, or others claiming under them. And in the application of this rule, it has been contended in support of the motion, that as the plaintiff claims through O’Hara, who was party to the alleged corrupt agreement, she cannot maintain this action. Let us however, examine the nature of this contract. It is the undertaking of the defendants to pay to James C. Brown qr his order, and with his endosement in blank it becomes in effect, according to well settled rules, a note payable to bearer, it is, therefore, substantially, an undertaking to pay to whomsoever shall be in the possession of it. And thus the relationship or privity necessary to sustain an action isr established between the parties. This, therefore, must be regarded as a direct undertaking on the part of the defendants to the plaintiff.

The plaintiff declares as the indorsee of James C. Brown; and let us suppose that the defendant was put to plead the usury in bar; without following the technical language of such a plea it must substantially state, that the note was once in the hands of Joshua Brown, and that, in consideration of a certain corrupt and usurious agreement, he transferred it to O’Hara, both of whom are strangers to the record, and 1 think it would confound sophistry itself to establish by any deduction from principle, that, therefore, the' plaintiff was not entitled to maintain her action. Such a conclusion would be as wide of right reason, as that because * man moves and breathes as veil as a horse, therefore, a man Ss'a horse.

The opinion of Lord Ellenborough in the case of Lowes and others vs. Mazarado and others, 1 Starkie’s Rep. 385, has been relied on’as conclusive in support of this ground, So far as the case itself is concerned, there is no disposition to find fault with the result ; it is in- strict accordance with well established principles, and which have been acted on by-this court in the cases of Payne and Smith, Fleming and Mulligan and many others; for in that ca-e the bill of exchange was drawn and indorsed by the payee and carried into-the market to raise money, and having been discounted at an usurious rate of interest, it was corrupted in its creation and was therefore void, andit was still more and more polluted even by the transfer to the plaintiffs. But admitting all that is said in that case to be law, and his lordship was 'made to say that the indorsement was entirely avoided by the statute, against usury, yet it is possible to distinguish this case . from that. If Joshua Brown may be regarded as a stranger; to the payee James C. Brown, and. that may be. fairly pre-». Sumed in favour of the verdict, the plaintiff is under no ne- . cessity of tracing her right through either of the parties to the corrupt agreément; her claim, exhibited on the record is directly from the payee.

• But I cannot reconcile such’ a doctrine with the well settled rule, that it is not usurious to sell or buy a negotiable-, paper founded on a legal consideration for less than its nominal value; and that such is the rule may be deduced without, the aid of authority from the universal practice and consent. of mankind. Bonds, notes, bills of exchange, bank notes, ■ certificates of stock and even . specie itself are the common subject of traffic, and their intrinsic value must always depend on such an infinite variety of circumstances, that no. foresight' or wisdom can regulate it. it is, therefore, I think wisely left to take care of itself, and I confess that after the most di» ligent effort, 1 have been unable to detect, in this case, a sip-gle circumstance which distinguishes it from the ordinary case of selling a note for less than its nominal value. To declare that the parties to such traffic had, incurred the pains of usury, would convulse the whole commercial world to its ■center. ' ■

Peiignl, attorney general, for tlie motion.

JUcCradij, contra.

Motion refused.