Case Name: George G. Torrey et al. vs. George W. Grant
Court: High Court of Errors and Appeals of Mississippi
Jurisdiction: Mississippi
Decision Date: 1848-01
Citations: 10 S. & M. 89
Docket Number: 
Parties: George G. Torrey et al. vs. George W. Grant.
Judges: 
Reporter: Mississippi Reports
Volume: 18
Pages: 89–98

Head Matter:
George G. Torrey et al. vs. George W. Grant.
Under the statute of this state which prohibits the taking, directly or indirectly, for any contract, bond or note for the payment of money, founded on any bargain, sale, or loan of wares and merchandise, goods and chattels, lands and tenements, or any use or occupation thereof, more than eight per cent, interest, a sale of a tract of land and negroes, estimated at a cash price of fifty-three thousand dollars, on a credit of six years, the different instal-ments bearing ten per cent, interest per annum, is usurious ; although the statute authorizes the taking of ten per cent, on a bona fide loan of money.
If a note be affected with usury in its origin, every renewal or change of the security is equally affected ; nor will the usury be cured when a greater sum than the usurious interest is paid on the debt.
The indorsee of an usurious note, who at the time he obtained the note had knowledge of the usury, cannot recover thereon beyond the principal sum, even though he took the note upon the assurance of the maker that he would make no defence to it; the consideration being an illegal one, the waiver of the defence was not binding on the maker as to a party having notice; it would be otherwise with a mere failure of consideration.
In error from the circuit court of Claiborne county; Hon. Thomas A. Willis, judge.
George W. Grant sued. George G. and P. H. Torrey, on a note made by them dated' March 2d, 1841, for $ 1700, payable to the plaintiff or order, on or before the 1st of January, 1842, at the Branch of the Planters Bank at Port Gibson.
The defendant below then proved by Alexander Torrey that the note sued on was given in renewal of a balance due on a note for $6000, dated February 13, 1841, given by said P. H. Torrey, G. G. Torrey, and Alexander Torrey, to the plaintiff, due January 1, 1842; and that at the time of the renewal, $4300 was paid on the note of $6000, by delivering negro slaves to that amount to the said plaintiffs. That the note of $6000 was given in renewal of a note for $12,000, dated January 12, 1838, given by Alexander Torrey, G. G. Torrey, and George Hill to Saxton Shaw, and indorsed by Saxton Shaw and Mark A. Mitchell to plaintiff, due January 1, 1842. And that, at the time said note of $6000 was given, the sum of $6000 was paid on said note of $12,000, by delivering negro slaves to the plaintiff to that amount. The witness was one of the makers of the first note, and his name stands first on it, but it was given on a joint purchase of property.
The defendants below further proved by N. McDougall, that the above mentioned note for $12,000, was, one of six notes of the same amount, given by Alexander Torrey, G. G. Torrey, and George Hill, to Saxton Shaw, for the purchase-money of a plantation and negroes. Witness wrote the notes and the deed of conveyance, which were executed in his presence. That the consideration of said notes was as follows, to wit:
23 negroes, at $1000 each, $23,000
1353 5% acres of land, at $22.25 per acre, 30,119.15
$53,119.15
Which sum was divided into six annual payments of $8,853.19 each, to which interest at ten per cent, per annum, from January 1,1838, was added, as follows, to wit:
Int. on 1st instalment 1 yr. to Jan. 1, 1839, $885.31
“ “ 2d “ 2 yrs. 1840, 1770.62
“ “ 3d 3 << it it 1841, 2555.93
“ “ 4th “ ^ £t ({ it 1842, 3541.24
“ “ 5th “ g u n tc 1543, 4426.56
“ “ 6th “ g a c: tt 1844, 5311.86
18,591.51
71,710.66
Three horses and some farming utensils, 289.34
$72,000.00
Which sum of $72,000, was divided into six annual payments of $12,000 each, and notes given, payable respectively, on the 1st of January, 1839, 1840, 1841, 1842, 1843, and 1844.
The defendants below also proved by Thomas H. Wade, that he was present during the trade, and also when the notes were given. That it was a cash transaction, and ten per cent, interest was added to the notes for the time that was given on the payments.
The defendants also proved by Alexander Torrey, that the' plaintiff below, (Grant,) told him that, while on the trade for the note of $12,000, both Shaw and the witness had informed him that there was ten per cent, interest on the price of the negroes included in the note. And also thatsthe plaintiff below obtained said note in payment of an old debt due him by Saxton Shaw.
The plaintiff then read in evidence a letter of said Alexander Torrey to the plaintiff, dated January 23, 1839, as follows :
“ Dr. Grant, — Dear Sir, —I cannot give you as correct an answer as I could wish to do; but I can say to you that the notes given by myself, G. G. Torrey and Geo. Hill, are all entitled to a credit, except one in the hands of a Mr. Miller, and one in the hands of some person unknown to me. I have every confidence in Mr. Shaw, and expect he has put the proper credit on the paper. We returned seven negroes to Mr. Shaw, at the price we bought — $1000 each — with ten per cent, interest. You can make the calculation, and see whether he has given the proper credit on each note.
Yery respectfully yours, &c.
ALEXANDER ToRREY.”
And plaintiff proved by said Torrey that he believed said letter was written before the plaintiff became the owner of the $12,000 note.
Plaintiff below read in evidence the following letter, dated September 25, 1839:
“Dr. Grant, — Dear Sir, — The note drawn by myself, G. G. Torrey and Geo. Hill, and which Mr. Shaw traded to you, is entitled to no credit, and I hold no offsets agaipst it.
Yours, &c. Alexander Torrey.”
The plaintiff then read in evidence two bills of sale for ne-groes, constituting the payment of $6000, on the note for $12,000, and the payment of $4300, on the note for $6000.
The plaintiff then offered to read a letter from said A. Torrey to plaintiff, dated February 5, 1841, offering to pay the balance due on the paper held by plaintiff against said A. Torrey and his brother, in negroes, provided plaintiff would agree to take some children.
This letter was objected to, but permitted to be read, and the defendants below excepted.
At the request of the plaintiff’s counsel, the court charged the jury as follows, to wit:
“ If the jury believe from the evidence that the note sued on was given in discharge of a note drawn by Alexander Torrey, G. G. Torrey and George Hill, and of which note the plaintiff was the bona fide holder, and that there was no usurious interest included or added into the last note, they will find for the plaintiff.”
The defendants’ counsel requested the court to charge the jury as follows, to wit:
“ First. That if the jury believe that there was ten per cent, interest for four years included in the original note of $12,000, given by Torreys and Hill to S. Shaw, due January 1, 1842; and that before Dr. Grant, the plaintiff, became the purchaser of the note, he had notice that said ten per cent, interest was included in said note, or that ten per cent, interest for any part thereof was so included therein; that then the plaintiff was affected by notice of that fact; and could.not recover anything more than the principal of said note, without interest; and that if the jury believe that the note sued on in this action was given in renewal of the said note of $12,000, they will deduct from the same the amount of interest that was included in said original note.
“ Second. That if the jury believe from the evidence that the plaintiff had notice before he purchased the $12,000 note from Shaw, of the usurious interest charged in the note, then he is not entitled to recover, notwithstanding one of the makers may have told him he had no offset against it.
“ Third. That the defendants are not precluded by any admission made in relation to the existence of offsets against the original note of $12,000, unless the jury is satisfied that the promise was distinct and positive, and that the plaintiff was actually misled by it.”
Much of these instructions were overruled by the court. The defendants excepted • to the instruction granted at the request of plaintiffs; and to the refusal to charge as requested by defendants.
The jury found for the plaintiff; and the defendants bring up the case by writ of error.
H. T. Ellett, for plaintiff in error.
I. The statute fixes the rate of interest on contracts founded on the sale of land or chattel’s, at eight per cent., and prescribes the penalty for taking more. II. & II. 374, § 14.
■ 2. A new security given to the original party who committed the usury, or to a party having notice of it, and without any new consideration, but including the interest of the original transaction, will not purge the usurious consideration, or give a right of action.. Powell v. Waters, 8 Cow. 669, per Jones, Chancellor, 692, per Colden, Senator, 696; Tuthill v. Davis, 20 Johns. 285; Cuthbert v. Haley, 8 Term R. (390) 218 ; 3 lb. 534; 71b. 184; Lowe v„ Waller, Dough 736.
3. A subsequent security for no more than principal and legal interest, deducting all sums reserved usuriously under the former agreement, is binding. Wickes v. Gogerly, 1 Carr. & Payne, 396; (11 Eng. Com. Law Rep. 434); Preston v. Jackson, 2 Starkie’s R. 237; (3 Eng. Com. Law Rep. 332.)
If the original security comes into the hands of a bona fide holder, for a valuable consideration, without notice of the usury, a new security given to such bona fide holder will be good. Cuthbei't v. Haley, 8 Term R. 390.
4. But, a' person taking a note in payment of a preexisting debt, is not a bona fide holder, and is liable to all equities between the original parties. 6 Yerger, 108; 5 Johns. C. R. 54; 20 Johns. 637; 9 Wend. 172; 14 Peters, 318; 4 S. & M. 254; 4 Paige, 215.
5. This third instruction was pertinent to the case, called for by the facts proved, and was in the very language adopted by this court on a former occasion, to define the law upon this subject. McMurran v. Soria, 4 How. 154-160. See also Hamer v. Johnston, 5 How. 698; Land's Administrator v. Lacoste, lb. 478.
6. The letter read in evidence, and objected to by defendants, was inadmissible. 2 Stark. Ev. 25.
J. B. Thrasher, for defendant in error.
1. The price agreed to be paid was the price asked on credit; it has never been held that an extravagant price on long credit constituted usury. Planters Bank v. Snodgrass, 4 Hoav. 573; Van Schaick v. Edwards, 2 Johns. Cases, 369; Chit. Con. 238, n. 1; 7 Barn. & Cress. 453 ; 1 Mann. & Ryl. 143.
2. Grant was a purchaser without notice; he was informed there was no offset; the admissions of a co-maker of-a note are evidence against the others. 3 S. & M. 467 ; 15 Johns. R. 3; 7 Wend. 445; 3 Pick. 291.
3. No defence can be set up against a bona fide holder of a note, who has traded for it on the assurance that there was no defence. 5 How. (Mi.) R. 471, 698.
5. The same rule applies to an illegal consideration. 2 Marsh. 141; 10 Mass. 121.
5. If illegal testimony was admitted, it would not suffice to reverse the judgment. 1 S. & M. 22.
6. The charges refused were hypothetical, and properly rejected. 11 Wheat. 59; Boring v. Willis, 4 How. (Mi.) R. 386.

Opinion:
Mr. Chief Justice' ShaRkey
delivered the opinion of the court.
This action was brought on a promissory note which Avas given to Grant for a balance due as the residue of another note, which had been transferred to him by the payee.
One Shaw had sold a plantation and negroes to the Torreys, at an estimated price for the negroes, and also for the land per acre, which amounted in the aggregate to $53,119. The price was to be paid in six instalments, and ten per cent, interest was added to each instalment from the date of the contract, until maturity, it being considered a cash transaction, although no money was paid. Principal and interest amounted to $72,0001
This note was given for a balance on the instalment due in 1842. The original note was $12,000. A payment of $6,000 was first made, and another payment of $4,300, leaving a balance of $1,700, for which this note was given. The defendants set up the usury as a defence, and the questions to be determined arise out of the charges given for the plaintiff, and those asked and refused for defendants. It may be sufficient to notice the charges asked and refused.
The first charge refused was in substance this; that if ten per cent, interest for four years was included in the original note for $12,000, and Grant purchased the note with notice of the usury, or that ten per cent, included in any part thereof was so included, he cannot recover more than the principal due, without interest. And if the jury believe the note sued on was given in renewal, they should deduct from the same the amount of interest that was included in the original note.
The second charge refused was, that if the plaintiff had notice, before he purchased the $12,000 note, of the usurious interest included in the note, he is not entitled to recover, although one of the makers may have told him he had no offset against it.
Anri third, that the defendants were not precluded by any admissions made in relation to offsets against the original note, unless the promise was distinct and positive, and the plaintiff was misled thereby.
The points thus raised may be resolved*into two questions.
First, was this a usurious contract; and second, if so, can the defence be made against the plaintiff, who yas an assignee with notice.
It has been insisted, that these notes were not usurious, that the price in cash was $53,000, but the price on credit was $72,000. The case cited from 2 Johnson's cases was similar to this, but the judges were equally divided on the question of usury. It is a question of intention. In this case there can be no doubt but what the additional sum was intended as interest. The witness says it was considered as a cash transaction, in order to justify, as the parties supposed, the taking of ten per cent. The slaves were valued and purchased at $1,000 each, and the land at $22.25 per acre, and ten per cent, per annum was added as interest, for the time the notes had to run, and not as a part of the purchase-money. The statute provides, that no person shall take, directly or indirectly, for any contract, bond, or note for the payment of money, founded on any bargain, sale, or loan of wares and merchandise, goods and chat tels, lands and tenements, or any use or occupation thereof, more than eight dollars for the forbearance or giving day of payment of $100 for one year, &c. This statute evidently reaches the case, according to the understanding and object of the parties in making the contract. The statute would become a dead letter if it could he thus easily avoided. As the original note was affected by usury, every renewal or change of security must he equally affected. Chitty on Contracts, 237.
In the next place, is this defence available as against the plaintiff. The proof is positive, that he had notice of the usury before he took a transfer of the note. He is not, therefore, an innocent holder. Various letters passed between some of the makers of the note and the plaintiff below. One contained an admission that there was no offset. And subsequent to the purchase, by another letter, terms of payment were proposed. And on this ground an effort is made to get rid of the illegal consideration. The principle is a familiar' one, that when the maker of a note induces a third person to purchase it, he thereby waives his defence; otherwise it would be a deception on the purchaser. But in this class of cases, it will be found that the indorsee is an innocent person, and took the transfer on the strength of assurances made by the maker, without notice of any illegality in the consideration. Not so in this case, Grant took the note, knowing that it was in part founded on an illegal consideration. He was not deceived in the purchase. The case differs also from one in which a mere failure of consideration has occurred. The maker may waive such failure. This was an illegal consideration, a consideration prohibited by law. No waiver of this defence is binding as to a party who has notice.
In the case of Lomax v. Picot, 2 Randolph, 247, it is true the maker of a note was held bound to an indorsee who had taken the transfer on the assurances of the maker; although the in-dorsee knew what the consideration was, yet he did not know that the consideration had failed. Here the indorsee knew the consideration to have been usurious and therefore illegal. The defence in the case of Chadbourn v. Watts, 10 Mass. R. 121, was usury, and the maker was held liable to an indorsee; but the indorsee was ignorant of the usury.
From these remarks, it will he perceived the court erred. The plaintiff was not entitled to recover anything more than the principal, without interest; the question was fully embraced by the charges asked. If any part of this note is for the principal, the plaintiff is entitled to recover to that amount, but not beyond it.
Judgment reversed and cause remanded.