#### John J. Van Schaack *versus*Spencer Stafford

Where the maker of a promissory note, which was indorsed for his accommodation by the payee, applied to the plaintiff, in the State of New York, to borrow money, and handed him the note and he discounted it, reserving more than the legal rate of interest in that State, it was *held,*that the transaction was not a sale but a loan, and that the note was void for usury, by the statute of that State in force in 1827, .the time of the transaction.

In an action by the plaintiff against the payee of the note, the maker, being released by the defendant, was *held*to be a competent witness to prove the usury.

Assumpsit on a promissory note, dated October 22, 1827, for *$300,*payable to the defendant, in sixty days, signed by Jacob Lansing and indorsed by the defendant.

The defence was usury.

In a case stated it is agreed, that the following facts are proved by the testimony of Lansing, if he is a competent witness ; and the only question as to his competency arises from the fact of his being the maker of the note. He is in no way interested, having been released by the defendant. He testifies, that on October 22, 1827, he drew the note and the defendant indorsed it for his accommodation, and that on the same or the next day he applied to the plaintiff, who then resided in the city of Albany, to borrow money, and handed him the note, and that the plaintiff, after reading the note, gave the deponent a check for *$275,*which the deponent accepted for the face of the note, it being then agreed between him and the plaintiff, that the premium to be allowed on discounting the note should be *$25.*

The statute of New York for preventing usury, in force when the note was made and until January 1, 1830, declares it to be unlawful to take more than at the rate of seven per cent, per annum for the loan or forbearance of any moneys, and that all notes, &c. wherein or whereby more than seven per cent, shall be reserved or taken, shall be void.

If upon this evidence the defence of usury was sustained, the plaintiff was to become nonsuit.

*Sept. 19th'.*

*Bishop*and *Byington,*for the plaintiff,

cited as to the com-

petency of the witness, *Walton*v. *Shelley,*1 T. R. 296 ; *Churchill*v. *Suter,*4 Mass. R. 156 ; *Manning*v *Wheat-*
      *573
      *land,*10 Mass. R. 502 ; *Hartford Bank*v. *Barry,*17 Mass. R. 94 ; *Fox v. Whitney,*16 Mass. R. 118; *Knights*v. *Putnam,*3 Pick. 184.

*C. A. Dewey*and *Lanckton,*for the defendant,

cited to the point that the note was usurious, *Munn*v. *Commission Co.*15 Johns. R. 44; *Powell*v. *Waters, 17*Johns. R. 176; *Woodhull*v. *Holmes,*10 Johns. R. 231 ; *Powell*v. *Waters,*8 Cowen, 669 ; *Wilkie*v. *Roosevelt,*3 Johns. Cas. 66 ; *Jones*v. *Hake,*2 Johns. Cas. 60; —and in relation to the competency of the witness, *Stafford*v. *Rice,*5 Cowen, 23 ; *Bank of Utica*v. *Hillard,*ibid. 153; *Tuthill*v. *Davis,*20 Johns. R. 285 ; *Townsend*v. Bush, 1 Connect. R. 260.

The cause was continued *nisi,*and the opinion of the Court was afterwards drawn up by

Sep. 28th

Shaw C. J.

It appears by the facts in the present case, that the plaintiff does not stand in the character of an indorsee having taken the note for value in the ordinary course of business, as upon a sale and purchase of the note in market; but that the proposition to him was for a loan of money ; that the negotiation and agreement went upon that ground ; and that it was agreed between the parties, in a direct contract with the plaintiff, that $25 should be reserved as a premium on the discount; which is conceded to be more than seven per cent.; and if this is to be deemed within the statute of New York then in force, as interest upon a loan of money, then the contract was usurious and void. It appears to us, from the evidence, that this must be deemed a contract for a loan of money, and that the note was taken as a security upon that loan and so was void. Being an accommodation note, it did not acquire the character of a contract till it was discounted, and notwithstanding the form of the note, it was a direct and immediate contract by the plaintiff, for a loan of money, at a greater than the legal rate of interest. *Munn*v. *Commission Co.*15 Johns. R. 44.1

2. The other question is, whether Lansing, the promisor on the note, was a competent" witness to prove the usury thus relied on The Court have been called upon by the counsel *574for the defendant, to reconsider and change the rule of evidence adopted in this Court, in the case of *Churchill*v. *Suter,*4 Mass. R. 156, and the subsequent cases, which rule is relied on in the present case, to exclude the testimony of Lansing ; and most of the authorities upon that subject have, been cited. It is true, that that rule has been the subject of great discussion, and has received different decisions in different courts, and even in the same courts at different times. This rule however seems to have been uniformly acted on in this Commonwealth, down to the case of *Packard*v. *Richardson,*17 Mass. R. 122.

But we think there is no occasion for considering this question, because we think this case does not fall within the principle of the rule. This principle is, that no man shall, by his testimony, show that a contract which he himself has made and sanctioned by his name, and held out to the world as a valid one, is illegal, or has any secret taint, which will render it invalid in the hands of a third person, ^n the first case it was rested principally on the ground of policy, and on the maxim of the civil law, *nemo allegans suam turpitudinem audiendus est.*Such was the case of *Churchill*v. *Suter,*where the promisor and first indorser were called to show that in its original formation the note was usurious.

A party to a note, who is not interested, is not held to be an incompetent witness; but is only prohibited from giving testimony to show an illegality in the consideration, and thereby to defeat a security to which he has given currency by his name. To other facts he is a competent witness, as to prove a payment or other matter of defence, consistent with the original validity of the note, or not impairing the credit and character which he has thus given to it. *Fox*v. *Whitney,*16 Mass. R. 118 ; *Knights*v. *Putnam, 3*Pick. 184.1

Here the promisor was a competent witness to prove that the note was an accommodation note, indorsed by the defendant for the benefit of Lansing ; and this fact rebutted the presumption arising from the form of the indorsement, and showed *575that the plaintiff was not an indorsee without notice, taking the note in the course of business, but was in fact the first person who held the note as a contract, and stood therefore in the character of a promisee or first taker of the note. The case then falls within that of *Fox*v. *Whitney,*above cited, where the suit was brought by the representative of the promisee, and a co-promisor and surety, called as a witness, was held to be competent and not within the rule ; which would have excluded him had the note been sued by an indorsee without notice The promisor and indorser stood in the relation of principal and surety, and one being sued, we think the other, being divested of all pecuniary interest by the release, was a competent witness to prove that the plaintiff himself received the security upon a corrupt and usurious contract.

*Plaintiff nonsuit.*

See *Dunscomb*v. Bunker, 2 Metc. 8.

See *Buck*v. *Appleton,*2 Shepl. 284; *Adams*v. *Carver,*6 Greenl. 390, *Spring*v. *Lovett,*11 Pick. 417; *Slone*v. *Vance,*6 Ohio R. 246; *Drake v. Henly,*Walker, 541.