Case Name: William Payne, Indorsee of two promissory notes of hand, against Peter Trezevant
Court: South Carolina Court of Appeals
Jurisdiction: South Carolina
Decision Date: 1796
Citations: 2 Bay 23
Docket Number: 
Parties: William Payne, Indorsee of two promissory notes of hand, against Peter Trezevant.
Judges: All the Judges present.
Reporter: South Carolina Law Reports
Volume: 2
Pages: 23–33

Head Matter:
William Payne, Indorsee of two promissory notes of hand, against Peter Trezevant.
Charleston District,
1796.
A note of between^thc original parties to the 'transaction, is absolutely null and void even "f ^ thouiiftíie05 holder ma>" recover against an indorses”, on a count lor mo-received. an< negoiia-^^butweeii borrower and lender though the payee °‘ competent witness to prove the usurious transaction. Sending notes into mailcet, under pretence of sale, to raise money, is a shift to elude the statute, if the money is to be returned. Wherever a return cf the money is contepipiated by the parties, it will constitute a loan and not a sale.
UPON a motion to set aside a verdict, and grant a new trial, on the grounds that the finding of the jury was against law, evidence, and the opinion of the judge, before whom 7 . the cause was tried.
r, , _ This was an action on two promissory notes of hand, the one indorsed to the plaintiff, for 580/. and the other payable to him, for 27/. Is. 4d. sterling; tried by a special jury in Charleston, before Bay, T. in fuh/, 1796, to which there 7 70 j j 7 7 was a plea of non assumpsit, and another of the statute of 1 _ t .... - r . usury. T he report of the presiding judge was as follows :
That on the trial of the cause, Mr. House, a broker, was called to prove 'the usurious transaction in its origin ; but he was objected to by Mr. Desaussure, on two grounds: First, that he was payee of the notes, and had indorsed ’ 1 J _7 them, in order to give them circulation. It was evident therefore, he said, that he was a highly interested witness in the question before the court: and secondly, because he was called upon to invalidate a security, which he had given ; and that an indorser of a note, -independent of the question of interest, could not be permitted to prove the notes void, which he himself had indorsed, as it was very clear, if the notes were found to be usurious, he never would be liable to pay them : and relied upon the case of Walton and others v. Shelly, 1 Durn. & East, 296. as in point.
4 Burr. 2251. '
Pinckney, for defendant,
thought the objection in this case, rather went to the credibility, than the competency of the witness ; that he was in no wise interested in the event of this suit, one way or the other, and might be well compared to an insurance broker, who had underwritten a policy of insurance, who is a competent witness in an action on the same policy, against those who underwrote before him. 3 Durn. EsP East, 27. On another ground, he said, he ought to be received from the necessity of the case, otherwise the statute against usury would become a dead letter. Those kinds of transactions, he said, were generally done in so secret a manner, for the purpose of raising money, that unless brokers or those persons entrusted with the management of these kinds of concerns, were admitted as witnesses, the practice of usury would scarcely ever be developed or found out.
After hearing arguments upon both sides, upon this point, the judge ruled, that Mr. House, the broker, was a competent witness. That the defence in this case was not a common law defence, and to be governed by common law rules of evidence alone : but it was a defence created by statute, which was a transcript of the statute of Anne, and was a remedial one, to prevent usurious practices ; and therefore ought to have a liberal construction. That by the tenor of this act, the defendant himself was declared to be a competent witness, contrary to the rules of the common law, to prove the usury. And if the act made the defendant a competent witness in his own cause, then surely there could be ao solid objection to third persons, who could not possibly be more interested in the event of the suit itself or in the deter,nhialion of the question, than the defendant. Therefore, the ground of interest being entirely done away by the terms of the act itself, there could be no objection to the witness on that account.
On the ground of necessity, he was of opinion that he should be admitted. For if a broker, through whose hands these negotiations pass, was refused to be admitted, it would really render the act a nullity. The borrowers and lenders are seldom known to each other; they have no communication together on the subject; so that there is not one borrower in twenty who could swear that the whole sum mentioned in the bond or note was not paid down or advanced by the lender at the legal interest,' It is only, therefore, through the broker that the real truth of these kind of transactions can be established in a court of justice.
Mr. House was then sworn for defendant,
and he proved, that some time in the month of December, 1794¡, he was applied to by the defendant to raise him 500/. on loan for four months, for the use of which he would give 80/. at the rate of four per cent, a month ; and would also deposit, as a collateral security for repayment of the 580/. the principal and interest, at the expiration of that time, to the lender, a Georgia certificate which he then held for 2,000/. sterling. That he, the witness, knowing that Mr. Moses Sarcedas was at that time in the habit of lending money, went to him, and .asked him if he would advance the 500/. to the defendant, for the time and upon the terms before mentioned, to which he agreed. That the witness then went back to the defend», ant, and got the note, payable to himself, for 580/. sterling, and the certificate of the state of Georgia for 2,000/. sterling as a collateral security, which he delivered to Sarcedas, who paid him 500/. sterling, and gave him a receipt for the Georgia certificate for the 3^000/. which be engaged to re* turn at the end of the four months, upon the payment of the 580/. sterling, which money and receipt he went immediate-¡y afterwards and delivered to Mr. Trezevant, the defendant. That this 580/. was exclusive of commissions.
B. The reduced™ 'and shewn to him.
Moses Sarcedas was the next witness called by defendant, and he confirmed the testimony of Mr. House, as far as respected the transactions between them two. That he was applied to by Mr. House, on behalf of Mr. Trezevant, to lend 500/. and was offered a note for 580/. for the use of it for four months, to be secured by a Georgia certificate or indent for 2,000/. sterling, which he agreed to. That the rece5pj. noVvr produced and shewn him was the one he signed and delivered to Mr. House. That he kept the note for 580/. for thi-ee months, together with the indent, and then passed them both over to one Richard Dennis. The note < was payable to Mr. House, but was not indorsed by him till after he had passed it to Richard Dennis ; then he got Mr. House to indorse it, who was only a mere agent in the business. He relied on the defendant, and the security of the' indent. That after the note became due, it was renewed for one month, for the same sum, 580/. and another note, for 27/. Is. 4d. was given for forbearance money for that month; and these are the notes on which the present suit was brought. That he, Sarcedas, owed Mr. Payne about 300/. on a purchase of lands, and upon his order to Dennis, and on his paying Dennis 700/. the original note and indent were delivered to the plaintiff, Mr. Payne., by Dennis; but he thinks Mr. Payne did not know that the indent had been lodged as a collateral security for the note.
William Freeman, a clerk in the branch bank of the United States, produced the bank book, by which it appeared, that Mr. Payne had lodged Mr. Trezevant1 s note, dated in December, 1794,' for 580/. for collection, in the month of April, 1795, which not being paid, was returned to him. And that on the 23d of May, 1795, Mr. Payne again lodged defendant’s two notes in the branch bank for collection, one for 580/. and another for 2'll. Is. Ad. which be supposed were the notes on which this action was founded, as they were returned to him on non-payment, and corresponded in sums, and nearly in dates, according to the tinn s they had >o run.
On the part of the plaintiff, Richard Dennis was called as a witness, who confirmed the testimony given by Sarcedas5 that the note for 5801. dated in December, 1794-, had been pass* d to him, with the Georgia indent for 2,000/. as security, as mentioned bv Sarcedas ; and that in consequence of an order from Sarcedas, he delivered them both over to the plaintiff, Mr. Payne, upon his paying him 7001. which he received, but does not think Mr. Payne knew that the indent had been lodged as a collateral security for the payment of the note.
At this stage of the evidence, it came out, that Mr. Payne had sold this Georgia indent for 800/. sterling, and that the real object of the suit was only to recover from Mr. Treze-vant as much on these notes as would fully pay him up what Sarcedas owed him, at the time when he gave the order on Dennis to deliver up the note and indent, about 200/. sterling, together with interest, Sarcedas having in the mean time become insolvent.
Charles Nowell Simons, a broker, was also called by the plaintiff, who swore, that it had been a very customary thing' in Charleston, ever since the establishment of the banks, to send notes into the market for sale, and that these were not considered as loans, but sales of notes; as much as old bonds had been for one-half, or state indents at one-third.
Here the testimony closed on both sides.
For the plaintiff, several grounds were taken to the jury: 1st. That this was a sale of a note, and not a loan; and even if it was not a sale, then, 2dly. That this was not a usurious transaction between defendant and House originally ; it was fair in its creation, and lawful as between these two parties. As Mr. Trezevant had a right to make this ; ste payable to order if he pleased, and it was legal and fair in House tv receive it, any transactions afterwards, between the payee and third persons, might make it usurious as between them, but could not affect the validity of the note for 580/. sterling against the drawer. And for this purpose the case of Foltz v. Msy was relied on, in which it was determined, that a ‘ note originally fair, and not usurious, should not be affected in the hands of a fair holder, against the drawer, by any in-, termediate usurious transactions between other persons, through whose hands it had passed. Also, Esp. Rep. 2/4.
Bay's Rep fs p. 480 Racy's edit ‘
2dly. That it would interrupt trade, and embarrass com, merce exceedingly, if notes of hand and bills of exchange were liable to these exceptions, or could be affected in the hands of innocent holders for valuable considerations, by these pretexts of usurious transactions. No man could know when he was safe by receiving one of them in payment, as objections of this nature might start up against him at any time, after he might have passed them, off on his part in the course of trade.
3dly. That money ought to be left to find its own level ; that it was unwise and impolitic to restrain it, more than any other species of merchandise, and that it was a right which the juries of the country ought to defend and maintain.
For defendant, in reply, it was urged, that the act against usury was a good one, founded on the wisdom of our ancestors, and the same wise measure had been sanctioned by aimost every other civil society in the world, against similar practices. That it was the duty of juries to support the laws of their country, and not to render them nugatory ; that they had no dispensing power, to disregard or set at nought the solemn acts of the legislature, because they did not comport with their ideas of right and wrong ; and that their oaths imposed this obligation upon them, if the evidence brought this case within the law: and that it did, there could be no doubt remaining on the mind of any man wb'» btis heard this cause. That this act had in view two ¡kr..Aoí usurious transactions, direct and indirect; Direct usury, where it was apparent on the face of any contract, that more than seven per cent, interest was reserved for the use of money for one year: Indirect usury, where ingenious shifts and pretexts were fallen upon, to raise money at more than seven per cent, per annum, _ as by pretended sales of bonds or notes, annuities, stock, goods, or other chattels whatever. Every such device or pretence, if for the purpose of borrowing money, was absolutely null and void. That the late practice of brokers and usurers in Charleston, since the establishment of the banks, (for it never was customary before,) of sending notes into market for sale, as it was termed, at five per cent, a month, was one of the indirect methods prohibited by the act. That the case under consideration was expressly one of those cases of indirect usury, even allowing it to be a sale. The defendant wanted 500L ; he gave his note to the broker for 580/.; then allowing it, for argument sake, to be a sale, it could only be a sale of a note for four months, therefore the gain to the purchaser by this bargain, for these four months, would have been at the rate of four per cent, per month, forty-eight per cent, per annum, for the use of the money. Has not this, then, at the first blush, every appearance of usury, and that this pretended sale was only to give colour to the usurious transaction ? But the case does not stop here. It is manifest from the evidence of Mr. House, that the defendant wanted to borrow money, and that he employed Mr. House to raise it for him, and pledged the Georgia indent for 2,000/. as a security for returning the money at the end of the four months, and the receipt taken for the indent as a collateral security, proves it beyond all contradiction, as it was to be returned and given back to defendant, on repayment of the 580/.
e»i>. 4o, -it, Cv‘¿>4 9,fí'
2 Jly. That this was usurious in its origin, is equally evident, from the offer of the defendant, before the money was borrowed, by the making of the note, in consequence of this proposal to the broker, and by his taking a receipt for the return of the indent which was lodged as collateral security, upon repayment of the 580/. ; all which evidently evinced that 80/. was offered and accepted for the use of 500/. for four months, from the lender of the money.
Sdly. That as to innocent holders, if the plaintiff in this • case ought to be considered as such a one, as to the note for 580/. it made no sort of difference, as far as it regards the drawer of the note. For the law is clear, that all notes given' for gaming debts, on usurious contracts, and those given for base considerations, at common law, tyere all void in ..... •• , r , . . their original creation, as much as forged notes, into whose hands soever they might afterwards come. And although an innocent indorsee or fair holder might recover from an indorser from whom he received it, on a count for money had and received, yet against the drawer of such note he has no remedy.
Bell and Hood's case, Bay’s Rep. vol. 1. p. 249. Riley's edit.

Opinion:
The Judge,
in charging the jury, told them they were bound by the act of the legislature, enacted by the supreme authority of the state ; and if a jury was justifiable in disregarding any one act, they might refuse to be bound by any other act or law which did not accord with their own opinions ; and thus the fixed and stable principles of law would in future be obliged to give way to the fluctuating and uncertai* opinions of juries.
That the act in question made all usurious contracts void ; and that the evidence in this case brought the usuri- ' ous transaction between the original parties,. borrower and lender, so immediately and directly under the act, that it was impossible for them to wink so hard as not to see it. That the pretence of sale set up was a mere shift or colourable pretext, to elude the statute.
It was true, he admitted, that a man having an absolute right and power over his own property, might sell or dispose of it upon what terms he pleased, or even give it away, if he thought proper, where it was not to defeat creditors. And hence it was, that soon after the revolutionary war, bando and notes, and state indents, when there was little or no specie in the country, had been sold and disposed of for one-half of ¡.heir nominal values, at 100 per cent, discount, and many much lower, to an incalculable amount. But all those were real sales, not shifts to raise money. That every loan contemplated a return of the money at some given or fixed period ; whereas a sale was an absolute, irredeemable transfer, for valuable consideration, never to be returned. Thus there was a marked difference between them ; the former came under the act, the latter die act had nothing to do with. In this instance, a return of the money was in contemplation of both borrower and lender, and the 2,000/. indent was lodged as a collateral security for the re-tarn of the money, with the usurious interest; therefore there could be no doubt but that this ivas a loan, and not a sale, whatever might be the pretences to the contrary; and being so, it was clearly, in every point of view, a usurious trails-action.
i ¡'ill sdi"
ibid,
^ • 2 Htr. 124.!. Zefi, sts
But it has been said, Mr. Payne was an innocent holder, for valuable consideration ; he had no concern in the original transaction between the defendant and the broker. This does not in the least alter the case. For if the bargain was in its origin usurious, no circumstances afterwards between intermediate parties, however fair or legal, as between them, will ever give efficiency or validity to a note or bill, so as to charge the drawer. Doug. 715, 716. 1 Term Rep. 300. For if it was once permitted to an indorsee to recover on a usurious note, the lender could always pass away these notes or bills, either bona fde to one to whom he is indebted, or eolourably to some secret partner in the business, and by these means (as has been very properly observed) the statute would be eluded. But Mr. Payne, the present plaintiff, is not without his remedy, for although the note is void against the drawer, he has his remedy against the indorser, or person from whom he received it, in an action for money had and received to his use ; and if the negotiation was fair between them, upon this equitable ground his remedy would remain unimpeachecl. Besides, it was the usage and custom of merchants to take notes and bills upon the credit of the indorser, rather than the drawer, who might be unknown, so that he was not remediless upon the present occasion.
The cause took up two days in the examination of witnesses, and in the arguments of the counsel, and on the morning of the third day, the jury brought in a verdict for the plaintiff with interest and costs of suit.
The present was therefore a motion in the constitutional court of appeals, to set aside this verdict, and for a new trial, on the grounds, that the finding of the jury was against law, evidence, and the direction of the judge who tried the cause.
Upon the argument for and against this motion, nearly the same points were taken which had been urged before the jury, only the court told the counsel on the part of the defendant, they might reserve themselves for the reply to the plaintiff, if the court should think it necessary.
On the part of the plaintiff, all the grounds which had been taken at the trial, were again reargued ; and one eounsel on the part of defendant was permitted to answer those who had gone on, on behalf of the plaintiff. After which, the judges were unanimously of opinion, that the verdict should be set aside, and a new trial granted, without costs.
The Court observed, that at the threshold of this cause, the judge who tried it, had very properly admitted the broker who negotiated this business between the borrower and lender of the money, to be admitted as a witness, under the act. And that from his testimony, as well as from the testimony of Sarcedas, and the clerk at the bank, usury was stamped on every feature of the transaction between the original parties. If so, then admitting, Mr. Payne to have been an innocent hoider for valuable consideration, of the note for 580/. (though he could not be considered as such for the small note for 277. Is. 4d. for one month's forbearance money,) yet, as it was absolutely void in its creation, he never could recover against the drawer. That the authorities quoted on the trial, and many others, are all clear on that point. 'That the jury had found against this clear and positive testimony, as well as against a public law of the state, and the clear opinion of the judge who tried the case, upon all the points, as reported by him to this court. That it was the duty of this court, whenever the juries of the country will take upon them to disregard the laws of the land, and clear and indubitable testimony, to set aside their verdicts, to ties quoties, &c. until they can get twelve men firm enough to defend and support our legal Institutions. Otherwise, the fluctuating sentiments of juries will prevail against the stable principles of law.
Let the rule for new trial be made absolute, without costs.
All the Judges present.
JSh B. This cause was never brought forward again»