Case Name: Jacob Powell and Thomas Powell, plaintiffs in error, against Thomas Waters, defendant in error
Court: New York Court for the Correction of Errors
Jurisdiction: New York
Decision Date: 1826-12
Citations: 8 Cow. 669
Docket Number: 
Parties: Jacob Powell and Thomas Powell, plaintiffs in error, against Thomas Waters, defendant in error.
Judges: 
Reporter: Cowen's Reports
Volume: 8
Pages: 668–709

Head Matter:
Jacob Powell and Thomas Powell, plaintiffs in error, against Thomas Waters, defendant in error.
Where a case is made in the supreme court, argued and decided there; and then turned, pursuant to a stipulation, into a special verdict, which goes to the court of errors, how the latter court are to be informed of the points raised below, so as to satisfy their rule of reviewing those questions only^ Which were made there by the parties; whether by recurrence to the reasons of the supreme court, the case with points indorsed, or the special verdict as it stands on the record? Quere. Jones, Oh., and Crary and Spencer, senators, interrupting Duer, arguendo.
Questions as to the competency of a witness, and the like, cannot be raised in a court of error by special verdict; but only by bill of exceptions. And if they be stated in a special verdict, they will be disregarded.
Where the competency of a witness was intended to be the main question on error; and the question was stated by special verdict, instead of a bill of exceptions: whether the court of errors will allow the plaintiff in error, after argument, to withdrawn his assignment of errors, in order to move the court below to change the verdict into a bill of exceptions; and bring up the question upon that? Quere.
A note, valid in its inception, may be sold at a discount greater than the legal interest; and yet be enforced by the holder; such transfer not being usurious.
The test of a valid note is the right to maintain an action upon it, when due, against the parties to it.
But where the note could not be available till discounted; and is discounted at a sum greater than the legal interest, it is usurious and void.
And this it seems, whether the person discounting know it to be a note before unavailable or not.
A note made, and indorsed for the purpose of fair discount at a bank, if discounted by another at an usurious rate, is void.
*So if it be made and indorsed for lawful discount any where, though it be discounted by the person intended, at an usurious rate, it is void.
A note void as between the parties for usury, is void, even in the hands of a bona fide holder,
Dicta. Knowledge of one partner discounting a note for a firm, is constructively knowledge to the whole firm. Per Jones, chancellor, and Golden, senator.
And, therefore, if negotiated to other members of the firm, without actual notice, a new substituted security taken by them is void. Per Jones, Chancellor.
But where a bona fide holder of an usurious note, without notice of the usury, takes a new substituted security, this cannot be avoided for usury. Per Jones, chancellor, and Golden, senator.
A renewed security, including the usury of the first, to one who was party to the original usury, is equally void with the first; and so to one who has notice of the usury. Per Jones, chancellor, and Golden, senatorio)
A note takes effect1 only from its delivery; but though delivered after its date, it is then good by relation to, and takes effect from its date. Per Jones, chancellor.
Whether, and how far, one whose name appears on negotiable paper can be received as a witness to show it void in its origin? Quere. Per Golden, Spencer, Chart and Stebbins, senators.
To questions of law the judge is to answer; the jury to questions of fact Per Golden, senator.
Giving and receiving designedly mere than legal interest is, without any express corrupt agreement, usury. Per Golden, senator.
A bill of exceptions, and demurrer to evidence or special verdict, may, he taken in the same cause. Per Spencer, senator.
If the court of errors can disregard a plain error in the record, whether pointed out by the counsel in the pourt below, or not? Quere. Per Spencer, senator.
Where a witness is improperly admitted, on exception, a new trial may be awarded; but on a -special verdict, judgment must go. Per Jones, chancellor, and Spencer, senator. -
A second indorser of a promissory note, is, in point of interest, an admissible witness for the first, in an-action against him by the second indorsee, his interest being against the party calling him. Per Spencer, senator.
An indorser can never sue his indorsee as such. Per Spencer, senator.
The supreme court have no right to rescind a rule of evidence, which they have established; and which has been received and recognized as law "for upwards of 20 years. Per Spencer, senator."
The rule formerly held by the supreme court, that one whose name appears' on negotiable paper, shall "not be received to testify that it was void ah irátio, did not apply to one who held the paper mala fide.
On error from the supreme court. The action below was assumpsit by the plaintiffs, J. and T. Povíell, as second indorsees, against the defendant, as first indorser of a promissory note. (17 John. 176, S. C.)
"On the trial, before Mr. Justice Woodworth, at the Orange circuit, in September, 1820, the jury found a special verdict, as follows: That on the fourteentli day of July, 1814, Benjamin Wood made and signed his certain promissory note, by which he- promised to pay to Thomas Waters, or order, ninety days after date, fifteen hundred dollars, at the bank of Newburgh; that Waters endorsed the note to Eichard and William Smith, and Eichard and William Smith afterwards endorsed the note to J, and T. Powell & Co., and J. and T. Powell & Oo., afterwards indorsed the note to Jácob and Thomas Powell; that dire and legal" demand of payment of the note was made, of Benjamin Wood, and due and legal notice of the non-payment and protest was given to each of the indorsers on the note. That the only witness introduced and sworn by and' on the part ánd behalf of Thomas Waters, the defendant, was William Smith, who was one of the - firm of Eichard and William Smith, the second indorsers of the note; and that the witness was objected to by the plaintiffs; as incom» petent to testify in this behalf; that it was proved by witness that the* note- was- indorsed by the defendant,- Thomas "Waters, for the accommodation of Benjamin Wood,the drawer, and was executed, as a renewal of a former note for the same sum, executed by all the parties on the above described note ; that- the* first note- was drawn- for the purpose of being discounted- at the bank of Newburgh, and was handed to William Smith, to be offered,, and William Smith did offer it to the bank of Newburgh, tobe discounted,, for the benefit of Wood, the drawer,, and the bank refused to discount it; that William Smith afterwards took the note to Henry Parish, who was then a partner with the plaintiffs,, Jacob and Thomas Powell, under the firm of J. & T. Powell, & Co.; that Parish agreed to receive the note at a discount of ninety dollars; that William Smith left the note on that offer, and Parish paid to William Smith about one half of the sum remining, after deducting ninety dollars; and the other half Parish, placed to- the credit of Wood, the drawer; that Wood, the drawer, was largely indebted to the firm of J. & T. Powell *&. Co. at-that time; that the counsel for the defendant produced a. note for fifteen hundred, dollars; bearing date the tenth day-of "March 1814, which was duly executed by all the parties, to the first mentioned note, and was proved, by William Smith-,, to be the original note, of which the first mentioned noté was a renewal;, that the- firm of Bichard and William Smith, and Benjamin Wood, the maker of the note, were at that time extensively concerned in business", in which, they were in the habit of’ mutually accommodating each other with money that either of them should raise; that William Smith had often negotiated paper for Wood, and retained to the. use of himself and his partner, such portions as thei-r necessities required,-and- accounted with 'Wood- for it-afterwards; that the* note in -question was discounted for the accommodation of Wood; that Wood, the drawer of the note, at the time it was discounted by Parish, was- legally"indebted: to"- J. &■ T. Powell & Go; in considerable sums of money; that the counsel for the plaintiffs produced a note, signed by Wood, and payable to J. & T. Powell & Co., for a blank sum, bearing date the fourteenth day of July, 1814, which note was in the handwriting of William Smith, but was not filled up at the time, because it was then uncertain how long the note or notes had run, and were to run unpaid. But whether or not, upon the whole matter aforesaid, by the jurors aforesaid, in form aforesaid found, the said Thomas Waters did promise and undertake in manner and form as the said Jacob Powell and Thomas'Powell have above declared against him, the jurors aforesaid are altogether ignorant; and thereupon, &c. On this verdict, the supreme court, in the term of August, 1823,- gave judgment for the defendant.
Woodworth, Justice, delivered the opinion of the court, as follows: The question is, whether Smith, the second indorser, was a competent witness to prove the usury ? When this cause came before the court, on an application for a new trial, (17 John. 176,) the case of Winton v. Saidler, (3 John. Cas. 185,) was considered. It was held that the precise point there decided was, that a person, *whose name is on a negotiable note, shall not be permitted to testify that the note, which he passed as good and available was void within his knowledge when it passed from his hands; but if it receives its taint when it is negotiated to the party plaintiff, by the facts then happening, it is not contrary to public policy or morality, nor would it come within the principle of the decision of Winton v. Saidkr, to hear-the witness as to such facts, if there were no other objections to his testimony.
The rule, thus understood, renders Smith a competent witness to prove the usury, without overruling any former decision; for he próves the usury to have been consummated when he passed the note to the plaintiffs, and not by anything that had previously taken place. The plaintiffs were not bona fide holders without notice; but the very persons who received the usurious premium. They are not within the reason of the rule relied on.
Whenever a question is presented that requires the expression of an opinion as to the doctrine in Win ton v. Said-hr, I am prepared to say it ought to be overruled ; and I may add, that upon full consideration, such was the unanimous opinion of our immediate predecessors in this court.
The defendant is entitled to judgment.
The reasons now rendered by the supreme court in support of their judgment below, were substantially as above.
The plaintiffs in error now relied on two points for reversal of the judgment below:
1. That the facts proved did not, in judgment of law, constitute usury, so as to avoid the note in the hands of the plaintiffs.
2. If there was usury, William Smith was not a competent witness to prove it.
T. J. OaJehy, for the plaintiffs in error.
The note was drawn for the purpose of being discounted at the bank of ¡Newburgh; a lawful purpose. Being refused discount there, W. Smith applied to Parish for the same purpose; but did not- communicate the fact that it was made for discount, or that it was drawn and indorsed by Waters for *the accommodation of Wood, although it was in fact discounted for his accommodation.. The fact is not denied, that it was in reality, an accommodation note. Parish acted as a member of the firm; and all the facts are consistent with the idea that he understood, or might have understood, that it was a business note fairly in the market.
It follows that this note (being a renewal,) was not usurious, even if the first was so. It has been settled by repeated adjudications, that the statute of usury avoids only the original contract; that a second contract between innocent parties is valid, though founded on the first. Between the same parties it is the same contract; but otherwise, if renewed in favor of an innocent assignee. (Jackson v. Henry, 10 John. 195, and the cases there cited by Kent, C. J.; Cuthbert v. Haley, 8 T. R. 390; Tuthill v. Davis, 20 John. 287.) The court below go on the ground that the plaintiffs were not Iona fide holders. This is not so, unless this court are prepared to charge One partner with the knowledge" of another. True, the proceeds went to the benefit of the firm; but they" are not chargeable with actual knowledge of the fact, that the original note was usurious. They, in fact, knew nothing about it"; and though they may have discovered its defects after receiving, and while holding it, this will make' no difference as- to the new Security. The court below did not advert to the fact, that Parish discounted the note; and, for aught that appears, without any knowledge whatever in his' partners'.
But the original transanction was not usurious. The note was drawn for a legal purpose, as before remarked ; and that it had been drawn for discount at the bank, and refused there, was not communicated to Parish. It was fair on its face; and he was asked to discount it; and he does so at an increased rate of interest. Our courts say, that a note has no legal inception, till it is indorsed or passed so as to afford a legal remedy upon it. (Marvin v. M'Cullum, 20 John. 288, 9, 290, and -several cases there cited.) If necessary, this doctrine might be questioned. The note *had passed through several hands; and how could Wood, the drawer, be said to be bound by Parish’s paying the money several days afterwards, if he was not originally bound ? But suppose it a mere blank paper till offered to Parish. The cases do no more than to hold a note void which is' made- for the purpose of an usurious, discount. (Munn v. The Commission Company, 15 John. 44, 55; Bennett v. Smith, id. 355, 357; Jones v. Hake, 2 John. Cas. 60, 1, 2, &c.; Wilkie v. Roosevelt, 3 id. 66.) There must"be an understanding when it is made, that it is to go at a usurious discount. It is well settled, that if it be made bona fide, though without any consideration, it may pass. This is not only well settled by authority, but it is matter of daily practice. The notes of the best men in community pass in this way. Does- it follow that it waá created for a usurious purpose; because it had no existence till delivered to Parish? The cases of'The New York Firemen Insiirccnce Company v. Ely and the same v. Wagar, (2 Cowen, 705, 712,) abundantly show, that to constitute usury there must be a corrupt agreement between the parties, either expressed or implied from the case. .Here,.even if Parish did know the origin of the note, he also knew .that it was legal.. Thus all comes back to a note fairly negotiated at a discount. In such a case it would be valid, though discounted at half its face. If there .was any usurious contract, it was between W'Smith, and Parish. But-all the cases avoiding notes for usurious discount are. attended with the fact that the party discounting knew that the note, was made for the purpose of such discount. It must be so in the nature of things; for the one who discounts.is made a party.to the usurious contract. The decision of this identical case, in 17 John. 175, is the only one which dispenses with such knowledge. Jackson v. Golden, (4 Cowen, 279, expressly, requires it.
But William Smith was not a coinpetent witness. The counsel here examined and vindicated the rule, that one whose name appears upon, negotiable, paper cannot be received as a witness competent to question its validity in •its origin, as against a bona fide holder. He advocated the rule not only upon principle, but on the authority of Walton v. Shelley, (1 T. R. 296, A. D. 1786,) explained, narrowed or questioned through Bent v. Baker, (3 T. R. 27, 34, 5, 6, 7,) Charrington v. Milner, (Peak. Rep. 6,) Humphrey v. Moxon, (id. 52,) Phetheon v. , Whitmore, (id. 40,) Adams v. Lingard, (id. 117,) Rich v. Topping, (id. 224; 1 Esp. Rep. 176, S. C.,) Hart v. M’Intosh, 1 Esp. Rep. 298,) Buckland v. Tankard, (5 T. R. 578,) Jordaine v. Lashbrooke, (7 T. R. 597, 601, &c., A. D. 1798,) down to Winton v. Saidler (3 John. Cas. 185, A. D. 1802,) wherein, the rule in Walton v. Shelley, was adopted and confined to negotiable paper, by three to two of the .supreme, court.
The counsel then cited and commented on the other American cases which had recognized or adopted the same rule: (Baker v. Arnold, 1 Cain. Rep. 258. Coleman v. Wise, 2 John. Rep. 165. Mann v. Swann, 14 id. 270. Skelding v. Warren, 15 id. 270. Woodhull v. Holmes, 10 id, 231. M'Fadden v. Maxwell, 17 id. 188. Powell v. Waters, id. 176. Stille v. Lynch, 1 Dall. 194. Pleasants v. Pemberton, id. 196, 197. Fox's Lessee v. Palmer, id. 214. Allen v. Holkins, 1 Day’s Cas. 17. Webb v. Danforth, id. 301. Parker v. Lovejoy, 3 Mass. Rep. 565. Churchill v. Suter, 4 id. 156. Barker v. Prentiss, 6 id. 430. Widgery v. Munroe, id. 449. Jones v. Coolidge, 7 id. 199. Manning v. Wheatland, 10 id. 502. Butler v. Damon, 15 id. 223. Fox v. Whitney, 16 id. 118. Hartford Bank v. Barry, 17 id. 94. Packard v. Richardson, id. 122. Canty v. Sumpter, 2 Bay, 93. Houhton v. Page, Adams’ N. H. Rep. 60.)
The counsel also eited and resisted the American cases which oppose the rule in Winton v. Saidler: (Tuthill v. Davis, 20 John. 286, 287, intimation óf Platt, J., against the rule. Stafford v. Rice, 5 Cowen, 23. Bank of Utica v. Hillard, id. 153. Townsend v. Bush, 1 Con. Rep. N. S. 260.)
As the court did not pass upon this question, the arguments are, therefore, not inserted at length.
The counsel also insisted that 'Smith was incompetent on the ground of interest.
J. Duer, contra.
This case is far from involving much difficulty, although the questions stated and -raised by the plaintiffs in error are important.
One answer to the first point proposed is -preliminary: that it was not raised in the 'court -below. (Beekman v. Frost, 18 John. Rep. 308, and the cases -there cited.) Defects in the testimony introduced to prove usury, are now objected for the first time.- This is a-surprise upon us; for had they been objected below, they might have been obviated by a further examination of W. Smith, or the introduction of other testimony. The case,is, therefore, directly -within Beekman v. Frost. The point below related to the competency of W. Smith as a witness, and this only. That I am correct, appears from the language of Woodworth, J., who gave the opinion of the court. That further proof might have been adduced, will appear by looking into this same case, as reported in 17 John. 176. The question of Usury was up there; but not when the case" came again before the court, on the facts upon which this special verdict was made out. This will be obvious on looking into the case upon which this verdict was framed. {The counsel produced and referred to the case.)
[Jones, Chancellor, There is a difficulty in saying how far we may be warranted in looking into that case for any purpose. Here is a special verdict, by which the parties are concluded, I doubt our right to look beyond that; and yet we ought to be guided by the very case as it stood below, and the pdints raised upon it and decided by the court]
CrAry, Senator. I think the counsel should be allowed to proceed with the argument, leaving the court to examine and make up an tipinion upon the question, whether they can look beyond the verdict, in order to get hold of the points below. It has been decided that we should be governed by them; and how are we to get at them unless *we look to such points as were raised upon the case ? The special verdict, as such, was probably never argued below. I think we shall be under the necessity of looking into the case.]
[Spencer, Senator. The counsel should clearly be allowed to go on upon the question as to the manner in which we are to be informed what points were before the court below.]
Due?-. I suppose the opinion of Woodworth, J., will be sufficient evidence of what was the question there.
But if the preliminary objection shall be thought unten-, able, we say, in the language of all authority, that knowledge in the holder is not necessary to avoid any security for usury. A usurious note is void in the hands of an innocent indorsee.
A mere usurious discount is not enough to avoid an existing note good in its origin. But if, when discounted, it ^aS no existence, but depends upon a valid discount for its life, the discount being usurious," the note"is a nul-. lity; and that wé say without regard to knowledge in the person discounting, or any subsequent holder. (Jones v Hake, 2 John. Cas. 60. Wilkie v. Roosevelt, 3 John. Cas. 66, 206. Munn v. The Commission Company, 15 John. 44, 55, 56. Dunham v. Dey, 13 John. 40. Powell v. Waters, 17 John. 176.) Here was no- consideration whatever between "tie original parties, and the discount was nearly at the rate of 25 pér cent, per annum. All the facts necessary" to constitute the' usury are found by the verdict. ‘ The cases will be found to exclude knowledge, and put the usury upon' the nature of the note. The one who discounts must inquire of all the circumstances at his peril. But there is no doubt Parish knew it was an accommodation note; nor is it any answer that the note was made "for discount at a' bank. Such an objection is completely answered by the supreme court in considering this case, 17 John. 176. - It was not, for that reason, operative as a perfect note, before the discount;
*But assuredly we may complain, upon the last ground, that its original purpose was changed, and it was fraudulently in circulation.
It was discounted by the funds of J. & T. Powell & Co., Parish being one of the firm. He discounted the note, in that character. Wood, the maker, was indebted to the firm, and a portion of thé note was passed to his credit. Thus the' firm was an original party tó the transaction. Parish did not receive the nóte to his own individual usé. .Payment has never been received. The whole remains due. The whole transaction was entered on the books of the firm. The new nóte was taken by the same parties. There has been no' such change of parties, therefore," as will" give effect to this note as a substituted one.
But if the verdict be imperfect in any respect as to making out the usury, this court will direct a‘new trial on a venire de novó, and should not simply reverse the judgment.
The point as to the competency of W. Smith to testify, cannot be raised upon this verdict. The jury cannot.decide on the competency of a witness. The only course is, to except to the opinion of the judge. This not being done, the objection was waived. The jury find that the objection was taken, it is true; but their finding is so far a nullity, and is entitled to no notice whatever.
But if the question, is fairly up, we then say W. Smith was a competent witness. (The counsel resisted the rule in Winton v. Saidler, both on principle and the cases referred to by the counsel for the plaintiffs in error. . His answer is omitted, for reasons ut supra. He cited no additional cases.)
Oakley in reply.
When counsel seek to shut out a point as not made below, they should show bv the record, or the admission of the parties, that it was not raised. *The facts bearing upon the question of usury are in the record. ,We do not appeal from the opinion. That is no part of the record. This court would hear the case, though no opinion were here. It would be singular for the counsel to allege diminution, and pray a certiorari to bring up the opinion of the court below. Suppose the court below, or the counsel may have mistaken the point on which the case turned, are counsel here, therefore, to be precluded taking it ? Are this court therefore bound to spread on its records (to be received as the highest evidence of the law) a judgment erroneous on its face ? How is this court to be informed of what points were taken or considered below? Till the contrary be shown, we must take it that all proper questions were raised. This court cannot look to the fact that there was ever a case below. The cases on which Beekman v. Frost proceeded, were mainly either appeals from chancery, or where the omission was agreed by counsel. That case was itself an appeal. Courts are bound to decide upon the justice and law of the case, and not merely upon the points raised by counsel. (Lyon v. Tallmadge, 14 John. 501, 517, per Spencer, J.) In Palmer v. Lorillard, (16 John. 348, 358, per Kent, Ch.,) the judgment was reversed upon a point not noticed below at all; and it was held, that as it came here on special verdict, that must be looked to, and compared with the record as a guide;' and the foundation of the action being thus seen to fail, the judgment could not be supported. In the principal case, usury was the very point on the trial. The court below, though it was raised before them, may have passed it over in silence; or they may have spoken of it there, and not noticed it in their reasons now rendered to this court. Though counsel might have thought it important, the court below might not have thought with them; and for that reason the point may not have been noticed in their opinion. That the point raised here for the first time, or facts upon which it is founded, are incapable of being obviated, is mentioned in the case as a reason for entertaining it. It thus forms an exception to the general rule. That rule cannot apply to* a special verdict. A new trial cannot be had upon a special verdict, on the ground that there may be further proof. There was no way, therefore, in which the objection could have been cured below.
I deny that the mere want of consideration will render this note void. To have that effect, the want of eonsideration must be within the knowledge of the party discounting : and to avoid the substituted note, at any rate, there should be knowledge of the original usury in the party discounting, as in the case of Wilkie v. Roosevelt. That Parish knew anything of the usury, is not found by the verdict. It is, at most, mere matter of inference from various facts stated. This court have repeatedly refused to be governed by inference from a special verdict. They require it to find the fact directly.
A defect in a special verdict cannot be amended on error. Such a thing was never heard of.
As to the manner in which the question is brought here upon W. Smith’s competency, we admit it might have come up on bill of exceptions, and such is the ordinary mode. But this verdict is equivalent to a bill.- It finds that Smith was the only witness' examined, and from whom the usury is o be derived, if at alh The whole appears upon the re* cord. Smith’s testimony must be taken as here, and comes up clogged with the objection.- That testimony is stated as the evidence of Smith, not as a finding of facts. The jury say he testified to the facts, not that they find them. The whole is in form of a bill of exceptions.- If the exception is to be stricken out, then the whole evidence must go with it. Such is the consequence' 6f the objection raised. This being done, the plaintiffs must recover of course; for there is then no defence upon the record. The only facts well found, and which can be received, sustain the action beyond a doubt.
[The counsel replied upon the point of Smith’s competency ; but the reply, for reasons before assigned, is omitted.]
Jones, Chancellor. The action in the supreme court was assumpsit by the plaintiffs, as second indorsees, "against the defendant, as first indorser of a promissory note. ,
Action below,
It appears by the special verdict, that the plaintiffs gave the requisite proof to entitle them to recover; and the question in the cause arises upon the defence of the defendants which defence was, that the note was usurious and void.
Defence,
The' only witness -offered by the defendant was William Smith, one of the indorsers of the note; and it would appear, from the reasons assigned by the supreme court for .their judgment, that his competency as a witness to prove tire usury was the only point agitated in that court. But that question cannot be raised in this court upon the record before us. It appears, by this record, that the jury gave a special verdict, by which they find the facts set forth by them in that verdict, and refer it to the court to determine whether the defendant made the promise3 imputed to him by the plaintiffs, or not. On that verdict, the supreme court have given judgment for the defendant. That judgment is before this court for review, and we must form our judgment upon the. matters contained in the special ver diet. .We cannot look out of the . record to see-what the . . _ „ . supreme court had- before them; and if a point'was made there which the powers of -that court and the forms''of proceeding permitted the judges to decide, but-which cannot, consistently with- the'course of proceeding upon* this record, be raised in this. court for our consideration,, however strongly: its = materiality may be ■ urged upon-1 us, we - ¡can give -no decision upon it; for we have-no jurisdiction' to review" it.
ueg tion below re-potency C°of Smith,
That queati°n cannot ba
special ver* aict-
confined that. Court here t0
■ The admissibility of a witness is a question of evidence, -and must be-made at. the trial, and if-the -party against w^omdecided: there, -is dissatisfied with, the decision, he- must - bring it up for examination.by a bill óf exceptions. In this case, the attempt is made -to ‘incorporate the excep.tiou.to the competency of the witness’in the special- verr J r diet. The jury .find, .that-Smith, "who-.was an indorser" of the note, Vas the only witness introduced by the defendant,and that hewas objected toby the plaintiffs as *incompetent. On what ground his competency was impeached, whether -.as being interested, or as being a- party to the -note, or how otherwise, or whether he was received to testify under- the decision of the court in favor of h-is--competency, and if so, whether any exception was taken1 to the opinion of the judge who admitted him, the:jury do not-say. The finding -is in general' terms, that the witness was objected to as incompetent to prove the' usury; but was admitted to testify to the point. The counsel . for the plaintiffs in "error, on the argument in this court, insist that he was disqualified, both as-being interested and as'being a party to -the note; -and the question of his■ competency has been ■discussed at large by-the counsel on'.both sides, as being a point properly before us for decision. But how can such a question consistently with the course of'the- court, or with principle, arise on a special'verdict ? The province of the jury is to° find the facts which are proved by the evidence ¡before -them-; and when -they return a special, verdict, that verdict "is a record of those facts. They.'cannot incorporate in -that record, the exceptions taken at the trial-to -the competency of witnesses, or to the admissibility of evidence ;> and any such finding is immaterial, and must ‘be disregarded.
as"^o theSad“ missibility of araised3on error ta f.biilof esceptions only;
cial
The course of the court, and- the legal forms of proceedirig'in cases of special verdicts and bills of exceptions, áre so well established that it cannot be'necessary to enlarge tipon'the point. It is proper, however, to observe, that the objection is nota matter of form; but of substance -for the question' bf the competency of a witness is-'to 'be decided, in the''first instance, by- the circuit judge who tries- the cause; and his decision, with the exceptions taken by counsel to it, is, by statute; to be Sentid the supreme court in a separate record, for their revision ; ’and if that court -sustains the exception to the opinion of the circuit judge, a -new trial may be awarded. But when a special • verdict is given by a jury, the court give final judgment upon ■ that verdict for the party in whose favor' they-decide. -It „ „ i .» i . n * , . follows, that if the jury could incorporate the exception to the witness, or to his testimony in their * verdict, arid the 'court pass-upon it in that form, their judgment, if against‘the decisibn-of the circuit judge, will be absolute; and the party in whose favor the circuit judge had ruled at the trial would "lose the benefit of a new trial, which the statute intended to secure to him. Thus, in the case before us, if this court ‘should- examine the question of the competency of the witness, and- decide against it, judgment must be rendered on the- verdict for the plaintiffs for no defence would remain. We might by that’ decision do irreparable injury to the defendant; for the judgment of this court would be con- . elusive; and yet the defendant might have other evidence, ■which, upon a new trial, would inducen jury to find a verdibt in his favor; but which, under the decision -of the judge upon the former: trial, he deemed it unnecessary to produce.
sub" The distino
in the former yj®’ íe®3^.' tamed, a new trial may be awarded.
diet,
The statute has prescribed the form in which exceptions to the opinion of the judge are to- be brought before the court, and has directed that bills of- exception shall be returned to the supreme court, who may grant a néw trial there - on at their discretiori; and that-the bill'of excéptions and judgment thereon shall be matter of récord.
The party whose evidence is excepted to as incompetent, is entitled to the benefit of this provision; and his right to apply for, and the power of the court to grant him a new trial in the event of the exclusion of the testimony he relied upon, ought not not to be defeated or embarrassed by the substitution of the finding of the jury for a bill of exceptions to the opinion of the judge.
The facts found by the jury then, and appearing upon this record, are to be taken by this court as established by competent testimony; and the question is, whether, upon those facts, the plaintiffs are entitled to recover or not. The defence was usury, and the facts to prove it are substantially as follows: that the note in question was indorsed by the defendant for the accommodation of Wood, the drawer, as a renewal of a former note for the same sum, drawn and indorsed by the same parties. That the first note was made for the purpose of being discounted at the bank of New-burgh, and was offered to that bank by *Smith, for discount for the benefit of Wood, the drawer, and was refused to be discounted; that Smith afterwards took the note to Parish, a partner of the plaintiffs, under the firm of J. & T. Powell & Co. who agreed to receive it at a. discount of $90; that Smith left the note, on that offer; that Parish paid him half the amo.unt, after duducting the $90, and placed the other half to the credit of Wood, the drawer. It further appeared, that E. and W. Smith and Wood were, at that time, extensively concerned in business, in which they were in the habit of mutually accommodating each other, and that Smith had often negotiated paper for Wood, and retained for himself and partner such portions as their necessities required, and accounted with Wood for it after-wards. It further appeared, that the note in question was discounted for the accommodation of Wood, and that Wood, the drawer, was, at the time the note was discounted by Parish, indebted to J. & T. Powell & Co. in. a .'considerable amount.
The question is, whether the first note was usurious; for if it was, the nóte given in renewal of it, was affected by the taint imparted to the first, The first note was „ taken by * v Parish, at a discount or deduction of $90. It was for $1500, and had ninety days to run. The discount or interest was of course at the rate of about 24 per cent, per annum; and if the transaction is to be regarded as a loan of money upon the security of the note, it was manifestly usurious; and the note was utterly void.
Whether the usurious.0 WM
A note given m renewal of a usurious note, wit^th'lffe*1
There can be no escape from the charge of usury in the negotiation, unless it can be shown to be a purchase of the note, after its delivery to Smith, as the holder, for the sum given for it as the price agreed upon between him and Parish. The distinction between the purchase of a note,, , , ' . . . , . „ , , / and a loan upon it by way of discount, is well settled. A note which has been negotiated by the maker, and might, if at maturity, be enforced against him by the holder, may be sold at a greater discount than the rate of seven per cent. per annum, without involving the purchaser in the penalties of usury. But the note must be perfect and available to the holder, to make it saleable by him. The test is the right to maintain an action upon it, against the parties to it, if it was then due.
Distinction between the purchase of a feejJeCthane’its face, and a ^de °for disoounti
In the case of Munn v. The Commission Company, (15 John. 55,) this test was applied to distinguish between the purchase of negotiable paper, at an under value, and a hisürióus loan upon the credit of it, and the question was held to be, whether "the holder, at thetime’of the 'negotiation of the nóte or bill; had such a right to it, "as to entitle him, 'if it was then due, to maintain "an action upon it against the drawers and indorsers. If "hé could, then the discount of it at a higher rate than the legal interest, might "be defensible as a purchase; but if he cóúld not, then such discount would be illegal, "as a "usurious loan of money. Apply that test to this cáse. It is found by the jury, that this nóte was made for the purpose of raising money upon it by discount. " It was discounted at "a higher premium "than the legal rate of interest; and none bf the parties to it, nor Smith, in whtise "possession it was, ebuld'have maintained a suit iipon it at its maturity, "if it had riot been discounted. Then does it not come within the terms, as well the principal of the rriíé? It was Hot a perfect and available'note to Smith; " arid he could riot "have maintained an action upon it, if it had not béen negotiated, but had remained in his hands until it fell due, and,'according to the tenor and effect" of it, "apparently became payable. It was, in its "inception, an accommodation note, indorsed by the‘'defendant for the "benefit of the drawer, "arid placed By the drawer in the hands of Smith, as his agent, to Be offered for discount, and to be discounted for the use and benefit of the" drawer. Smith had no right or beneficial interest in it, or claim against either the drawer or indorsers upon it. It was an inchoate security, created for a particular purpose, which was to become available when negotiated by" the agent, in "pursuance of his authority; but which continued, until the negotiation of it for the purpose intended, the property of the drawer. As long as Smith, the agent of'the maker, continued the holder, it" was yet in the hands of the maker. The delivery" of it to Parish first ifnparted to it the life and efficacy of an available security. When Parish agreed to discount it, he took it not as a note which had been negotiated and passed to Smith, and held gy him in his own right: but as a note which Smith" was ^ ° -y ., to negotiate for the use oí Wood, tne drawer; and Parish, when he discounted it, retained one half of the net proceeds, and placed the sum to the credit .of Wood, the drawer, with the co-partnership of J. & T. Powell & Co. of which he (P.) was a member; and to which Wood was indebted at the time.
Test of a perfeot aote"
Eus How ease is.
Note could not be avallable till Rutebf by
The offer of the note to the bank of ¡Newburgh, and the refusal of that bank to discount it, did not change its character. The note remained after that offer and refusal, as before, in.the hands of the maker, subject to his disposal; and it so continued until it was delivered to Parish, for the firm of J. & T. Powell, who made the loan upon its credit and security. A note has no binding force, or legal, inception, nor constitutes any contract, until delivered and in the hands of a bona fide holder. It acquires the of a contract from the delivery ; and not ah initio from the execution of it. But when delivered it takes effect from its date, and for all substantial purposes, becomes a binding contract upon the maker ah initio. Parish gave life and vigor to the original note, which was inchoate and dormant until delivered to him, and the payment of money for it to the drawer. But the illegal discount he exacted for his loan, infected it with the taint of usury; and thus implanted in its inception and birth, the seeds of its death, L 7
± note takes
It thea takea ^ct from its
_ The illegal teethe nothin question with usury
e e e But it is said that the note was drawn for a legal purpose, which being disappointed, it was sold to Parish. It is true, that the note was drawn and indorsed for the purpose of being offered to the bank, to be discounted for the accommodation of the drawer, and if .the bank had ed it, and made the loan applied for upon it at legal interest, it would have been an available security in their hands against both the drawer and indorser. But when the bank rejected the offer, and refused the loan, the note was '"left in the same inanimate state in which it was before the offer was made. It had not acquitted any binding force by delivery, and had no legal existence as a contract. It was not the subject of sale, and could no more be sold to Parish, after the offer and refusal, than if no such offer,or refusal had ever taken place. The discount of the note by-Parish must be regarded as a,loan, and not as,a purchase of the note. The note had never been negotiated. The ^ntenti°n °f it; in its origin, was to raise money oti the credit of it, and the application to the bank of Newburgh was for a loan of money upon it by way of discount; and when ft was offered to Parish, the application was obviously for the same purpose. The same overture which the bank had rejected, was made to him. It was an application for a loan of money for the accommodation of the drawer of the note, on the credit and security of the drawer and indorsers of the note; and not a proposal to him to purchase the note as a subsisting security in the market for sale. He was tempted, by the premium, to make the loan, which the bank had refused at the legal rate of interest. It was a note avowedly made for the express purpose of borrowing money upon it; and though the original purpose was to obtain the loan at legal interest yet that purpose was changed before .the note had any legal inception or binding force; and it was finally delivered, and acquired the efficacy of a contract under an agreement for a loan at “usurious interest upon its credit. .
That it was ed a-t the bank
But it is said that Parish had no knowledge of the origin of the note; nor but that it was created in the course of business; or if he had, he knew that it had been made for a legal purpose.
The note was offered to Parish for discount by the agent of the drawer, and it was discounted by Parish for the ¿[rawer’s accommodation, One-half of the avails of it, after deducting the discount, was credited to the drawer, in his account with the firm of the Powells and Parish. He knew therefore, that it was an accommodation note, and was offered for discount by the drawer; and of course, must be held by him. And if it was at the disposal *of the -drawer, and to be negotiated for his benefit when it was offered for discount, its origin, or the purpose for which it was made and intended were quite immaterial. A note, after it has been negotiated.and put into circulation may be sold by the holder to á stranger; but it must be an operative contract, and the legitimate subject of a sale, at the time it is taken, or the money advanced upon it will be a loan, and not the consideration of a purchase. The fact of the offer of it by the maker or his agent for discount for his own accommodation is prima facie evidence at least of its being a security crea* ted, or -applied and used for the purpose of raising money by loan, 'it was incumbent, under such circumstances, ■upon the plaintiffs, to show, that it was a business note, or had become operative by negotiation or delivery before it was discounted by them, if such was truly the ease. It is -said that this note had all the appearance of a valid operative note; -but if it had been negotiated, and was in reality what -it appeared to be, it would not be offered for discount for the -use and accommodation of the drawer. Every indorsed note has the appearance of a valid operative note; and a note must assume that shape before it can be carried into the money market to raise money upon it; but the character of the note is generally known by the circumstances under which it is offered for discount. The application to Parish to discount the note for the drawer, if not decisive evidence of its -character, was surely sufficient to put him on inquiry into the origin and history of the paper. If he had inquired into the circumstances, he might have discovered the fact that the note had never been negotiated; but was offered for discount for the accommodation of the maker; and if he took it without inquiry, he took it at his peril.
THmafade, knowlege, that the note was tot a discount ness note. and not a busi-
It is said that if he knew its origin, he knew that it had been made for a lawful purpose. It was made for the purpose of being offered to the bank of Newburgh, to be discounted for the maker. Is it intended to be said, that because it was made for that purpose, it might, if refused to be discounted by the bank after such refusal, be taken by Parish at a discount beyond the rate of legal interest? It has been decided that a note made for the purpose of being ^discounted at a usurious interest, and indorsed for the accommodation of the maker, is void in its inception ; and that it is immaterial whether the taker of it knew the manner in which it was obtained or not. (15 John. 55, 355, 7.) He takes it at his peril; and though he may have supposed it to have been given in the ordinary course of,business, it is, nevertheless, void. But it does not follow, as seemed to be inferred from this decision, that if the note was origi na^5r ma^e f°r &e purpose of raising money upon it at lawful interest, and indorsed for the. accommodation ,of the. maker, and is therefore lawful and valid in its original formati0n, it may be discounted at a higher, rate than--legal interest. On .the contrary, a note, made and indorsed for the purpose of being discounted for the. accommodation, of, t^g maker, at lawful interest, if offered-by-, the-maker and discounted by the first taker of it at more. than, lawful- interest, is equally within the- principle of the rule, as if it had been originally framed for the purpose of discount at a usurious interest;. for the note had its inception, and took its- character from the delivery, and not from the signature. of the maker, or the indorsement of the, indorser.. The distinction is between operative notes, negotiated, for a lawful purpose,, and accommodation paper or notes negotiated on a usurious consideration, and not between notes made for a lawful-or for an illegal purpose.. The use, or, purpose for which the, note was made or intended is immaterial. It is the application of.it, the consideration and- purpose, for which it is negotiated and delivered to the first taker and original holder of it when it becomes -an operative note,; that determines its character.
r count, if in fact discounted rate, is equally fer the1 Mter purpose.
But it is urged, that the plaintiffs -were, not; parties to the usury, or conusant of it; and ought-not to be affected by it.. Parish, who. discounted the. note, was their partner. It was .discounted by him for the co-partnership, and not on his own private account; and one-half , of the avails of it was carried to the credit of Wood, the.maker, with that co-partnership, in payment of a demand against the maker, for whom the note was discounted; and the jury find that it was indorsed by Smith, the agent who procured it to be. discounted to J. & T. Powell & Oo., and was by. them indorsed *to the plaintiffs,, who are members of that copartnership. Parish then .acted in the negotiation for the firm; the loan.was made by the firm; and. the note indorsed and delivered to the firm. . If usurious, and void as to Parish,, could it be legal and valid as to his partners ? The plaintiffs may not,be implicated in the crime pf, the partner so ag ^ }nY0|ve them, in the punishment the -law might inflict. OH him; but they'are "bound by his acts, as far as their interest is affected, and must abide by the operation of usurious contracts for the firm, upon the securities he took for -the loan. In that' sense, and to that extent, his acts and his contracts are the acts and contracts óf the co-partnership; and the usury which infected the transaction in . , . question, was equally fatal to the note as if all the partners had been privy to it and concerned in it! A different rule would lead to a system of evasion, which would defeat the operation of the statute.
Plaintiffs were parties to the usury.
viliter by usury in a security
ta)-en one of tlle 6™, for the benefit of the firm,
But the second note on which this suit is brought, is claimed to bé a new security for the debt;' and it is contended that a new security, taken in renewal of a prior usurious contract by a bona fide holder, is not avoided by the usury of the original transaction.
And therestftuteT^securi<7is void,
That principle applies to the case of an innocent "holder of a usurious contract, for which he has given a valuable consideration, without notice of the usury. Thus in Cuthbert v. Haley, (8 T. R. 390,) A. made a usurious note to B., who transferred it to 0. for a valuable consideration, without notice of the usury, and A. gave a bond to 0. for the amount, and the bond was held not to be affected by the usury. ■
otherwise hoider^without notice.
A new security, taken by such 'a meritorious holder of the usurious note, has a just claim to protection. He is not implicated in the usury which vitiated the original contract, and if he can obviate the necessity of using the contaminated sectirity by procuring a new one to be substituted for it which is free from the taint, he shall not be visited with the penalty of an offence" he never committed. But does this case come within the protection of that principle ? These plaintiffs were' "the partners of Parish, and parties to the usury of the first noté. " They participated in the benefits of -his " unlawful contract, and must share in the effect it produces on the second security. (Tuthill v. Davis, 20 John. 287.)
A note given to renew and take up a former’ usurious note, then in the hands'"of the original "party, to the usurious contract, without'any new consideration", 'but including the interest of the original loan, is equally infected with the first. A mere change of securities for the same original loan, to the same party who committed the usury, or to a party who had notice of it, cannot purge the usurious consideration, or give a right of action.
Asubstituted note to the oufparty,wtt£ out any new consideration, and including the original usury, is equally void with tire first.
So to a party who had notice of the usury.
The second note, which is the foundation of this suit, was a renewal of the first. The same drawee and indorsers who were parties to that, are parties to this; and the present note was indorsed and delivered to J. & T. Powell & Co., who discounted the former note. It was the continuance of the old loan on the same security ; and the usury which affected the first security, equally attaches to the note given in renewal of it. The indorsement of the present note by the co-partnership to the plaintiffs, who are members of the co-partnership, cannot vary the case. If the note was void in the hands of J. & T. Powell & Co., it would be void in the hands of a Iona fide purchaser to whom it might be transferred by them; and it surely cannot have acquired validity by passing from the firm to two of the members of that firm, and who are chargeable moreover with knowledge of all the matters affecting it in the hands of the co-partnership.
Note in question was such a renewed note.
My opinion, therefore, is, that the.judgment of the supreme court was correct, and ought to be affirmed.
Golden, Senator. The only point decided in this case, by the supreme court, is, that Smith, one of the indorsees of the note in which the suit was brought, was a competent witness.
Whether Smith was a competent witness, was the only point decided by the supreme court.
Whether he was, or was not so, depends on the propriety of applying to this case a rule in some instances adopted by our courts, which will not permit, under certain circumstances, one who by his indorsement on negotiable paper has given it currency to destroy its validity by his testimony.
The question considered, how far one whose name appears on negotiable paper may be a witness to invalidate it.
*This, and other like rules, such as that no man shall be a judge, or witness in his own cause, that an interested person is an incompetent witness, &e., courts have felt themselves authorized to adopt, as the dictates of natural justice or moral law, though they never were prescribed by any statute. I believe the rule,, in question is not now applied but where a witness comes to destroy by his testimony the validity of a security which his name might have induced an innocent and bona fide holder to accept. Where an indorser has been produced to prove that he and the holder of a "security were parties or privies to a contract which made the security illegal and invalid, I do not know that the rule is now carried so far as to exclude his testimony; nor am I prepared to say, that either morality or policy requires that it should be enforced to this extent.
The maxim that no man shall be heard to allege his own turpitude, must be of very limited application; for if it were general, how is it that a po/rtkeps criminis is every day admitted as a witness, and that courts continually oblige witnesses to disclose every thing, however disreputable it may be, that does not subject them to a penalty or punishment?
When the testimony, of an indorser on negotiable paper is excluded, it is not, I apprehend, so much in regard to him, as to the policy of protecting negotiable paper, and to the innocent person who may have been led by the indorsement to take the note as a valid security, and whom the law will not permit the indorser to betray.
Courts are bound to give effect to the statute of usury without reference to its policy or impolicy, or to the hardship it may impose on innocent parties; but courts are not bound to aid it by sacrificing every moral and just principle, which it seems to me they would do, if they were to admit an indorser to prove usury against the innocent and bona fide holder *of a note. Where one of two parties to a corrupt agreement is permitted to prove it against the other, it may be. inore reconcileable. to our sense of moral justice,., and does not seem to,contravene, the policy, op which, the. rule is founded.
I should examine .this question, with more.attention., and feel myself bound to give a.decided opinion,upon it, ¿id I consider it properly presented by the case; but I .cannot think it came before the court below in a. proper manner,,. or that it is now legally submitted for ,our decision...
But the question does not arise on the record.
It must, be the judge .who tries the cause, who into transmit, when hé is required.in dup form to do so,, jus account, of what points of law arose for his decision in,the,course, of the trial, ¡and how he decided them.
The judge alone can transmit to this court points of law decided by law;
In my opinion, it will very much derange the administration of justice, if it be assigned to the jury,, as part of their province, to .state what were., the objections .taken by counsel, and.what disposition of them was made by, the. judge, . The jury are to find the.facts as proved by the witnesses whom the judge permits to be examined in the cause; but they are not to find what questions of law arose with respect to the admissibility of testimony, and the judgment of the court upon those questions.. They might as well be permitted to find the charge of the judge.. It seems to me that the province of the judge and jury are marked, by the maxim, that to questions of law the judge is to answer, and th,p Jury to questions of fact..
Not the jury.
The judge is to answer questions of law; the jury questions of fact.
Were a jury to be suffered to detail the history of the proceedings of the court in every cause they try,, to give their views óf.thp points of law. which, arose on the examination, pf witnesses, and to state their conceptions of the decision of the court, it appears to me we should destroy the purest features of our jurisprudence, and confound duties which it is the peculiar excellence of .our system to keep separate.
There, is no other way to bring in review a decision at nisi-pr vas than by a bill of exceptions, or, according to. our practice, a case. We then have from the judge an accurate statement of the points raised for his decision, and of his judgment upon them;, or, if .th,e pa,rty. did not choose to pursue *this course, and-relied on the incompetency of Smith, the only witness, he might have demurred to the evidence.
The only way to bring in question a decision at N. P. is by a bill of exceptions, or case, or demurrer to evidence.
The case before us is, in my opinion, a strong exemplification of the necessity or propriety of confining the jury to their proper province. In'this special verdict it is stated that Smith was offered and sworn as a witness; that the plaintiffs’ counsel then and there objected to him as incompetent to téstify in this behalf. But why he was objected to," whether as being an indorser on the note, or as having an interest both of which grounds have been taken by the plaintiffs’ counsel on the argument before us, does not appear. Nór does' it appear, otherwise than by inference, what was the opinion ór decision of the court. It is stated by the special verdict, that the facts which they find were proved by this witness; and, therefore, we may conclude that the objection was overruled. But had a bill of exceptions been taken the reasons'"of the plaintiff’s objection would have been fully stated, and we should have been at no loss to know" whether the judge had decidéd that he was disinterested, or that he was unexceptionable, although his name had given currency to the paper he had negotiated. As it is, the supreme court has decided'that his being an indorser on the note did not render him, under the circumstances of "the case, an incompetent witness. But they could not possibly know, nor can'we now possibly know, that this was the objection which was made to his testimony on' the trial. It tiiay be that the plaintiff’s objection rested in his being5 interested; and if it were so, the supreme court has rendered a judgment on a point which was not agitated at nisi prius. I shall" not, therefore, give any opinion as to whether Smith was or wás not properly admitted "to testify; but to confine myself to the consideration of the facts which the jury have found, ‘and had a right to find and inquire whether these facts establish that the note was usurious.
No questions have been more agitated in our courts than those which relate to usury. Various opinions as to the morality and policy of the statute have frequently biased the minds of jurors, and possibly sometimes of judges. The- crafty means contrived by the wit of man to evade the statute, *have given rise to so many cases, and to such nice distinctions, that the mind is in danger of being bewildered by the multiplicity of cases which present themselves when endeavoring to ascertain the law on this subject. Upon this occasion, as upon all others, I endeavor to divest myself of the influence of that eloquence which presents to me the policy or impolicy of a statute, and to govern my self, as far as I am able, by the maxim that it is the province of a judge to declare, not'to make the law.
No questions *?or® usury,
Jt would be extraordinary, if, at this day, when our re- . port books are so loaded with cases arising from the statute of usury, we were not able to extract some principles as established beyond controversy. I think we may, and that among these are the following:
Settled roles in the law of usury;
1. That the mere giving and receiving, designedly, more at the rate of seven per cent, per annum for interest, -*s usurJi although there be no corrupt agreement, other than that which is manifested by one party’s allowing and the other receiving the unlawful interest,
l. Giving and t ere" t¡e though without any roptSSS agreement, is usury.
2. That where a note or security is originally given for a legal consideration, it cannot atterwards become usurious at whatever rate it may be purchased or discontinued,
security, valid ™onlts c°”n°°ot become usuriever "rate it Sedb or counted.
3. That the converse of this proposition is true, viz. that if a note be given for a usurious consideration, or, in other usuri°us hs origin, it is “ utterly void,” in whosesoever hands it may be, although the holder should have given a full and legal consideration, and whether he did or did not know that there was any usury connected with it.
ori^naUyvoid for usuryfe^so of a lona fide
4. That if an original note or security be usurious, a sub-note or security taken in the place of the original note or security, by an innocent and bona fide holder thereof, ignorant of the original usury; is not usurious, unless more than at the rate of seven per cent, was taken upon the new note or security.
a security to holderTsvaüd!
5. That the converse of this proposition is also true, viz. t a new security taken for a usurious debt is void, if he J 1 who takes the new security was party or privy to the original usury.
5. Otherwise, if he was party or privy to the original usury,
*There is another proposition, in my opinion, equally well established, and applicable to the case under consideration, although it be not confined to the question of usury. It is that whatever may be the form of a note, or whatever characters the parties to it may assume, whether they appear as makers, payees or indorsers, it is not to be consias having existence as a note, until it be issued or negotiated, so that the holder, on its falling due, would have, if the note were legal, a right to recover upon it against any of the preceding parties.
note it has no legal ¿Overea, and aU parties acquire rights under or incur uP°n
a n i . . , . All these positions, I consider, are fully established by authorities cited on the argument. I shall endeavor to ply them to the case under consideration.
The above ^the case!164
The special verdict does not present the facts very perspicuously; but they appear to me to be as follows:
A note was produced on the trial, dated the 10th March, 1814, which, as the jury find, was “ duly executed by all the parties” to the note on which the suit was brought. I presume we are to understand from this that the persons whose names are on the note in suit were parties in the same respective relations to the note of the 10th of March that they were parties to the note in suit; that is, that the note of the 10th of March was made by Wood, payable to Waters, indorsed by him to Richard and William Smith ; by them indorsed to. J. & T. Powell & Co., and by J. & T. Powell & Co. indorsed to the plaintiffs, J. & T. Powell.
The facts.
The jury find, that the note of the 10th of March was drawn to be discounted at the bank of ¡Newburgh, and was handed to Smith, to be offered by him to the bank, to be discounted for account of Wood, the maker. The bank having refused to discount it, Smith took the note to Parish, who was then a partner of the plaintiffs, under the firm of J. & T. Powell & Co., and who, I think we must understand, continued to be one of that firm, as it is not found by the jury that he ceased to be so.
Parish agreed to receive the note at a discount of 90 dollars. Smith left the note, on that offer, with Parish, who paid Smith about'one-half the sum remaining, after deducting 90 dollars; and the other half he placed to the credit 0f *Wood, .the drawer. But it is not stated whether this ’ . creiilt was given to Wood in account with. Parish, or m. his account with J..& T., Powell & Co., to whom the jury find "Wood was largely indebted at that time.
The jury find, that the.note of the 14th .of , July, on whiph the sqit is brought, was a renewal of the above, described note of tfie 10th of March. That “ the note in question,” which,-1 presume, means the note of .the.14th of July,..was discounted for the accommodation of Wood, the maker, who, “ at the time it was discounted by, Parish,, was legally indebted to J..& T. Powell &.Cp., in considerable .sums, of money.”
This is all we can learn,from the.,special,verdict in relation to the.note of the 14th of. July. When it was discounted, or what was the discount taken, is not'found. Nor does tfie verdict afford .any further information in relation to this note. Neither, is it stated out of whose funds the money raised by the first note.was paid.
Ther.e,are other facts found by the jury in .relation to.the trading between Wood and the Smiths, and their habit of mutually accommodating each other, and-in .relation to a blank note, produced on the trial, the relevancy of which to the merits of the pase I cannot perceive.
The .verdipt does not admit of any other conclusion .than that the new note ■ of the 14th .of July.was discounted by Parish; and that he received the new note as a security for .the money which was loaned on the first note.
That the first note was usurious, seems to be conceded on all hands; and, in my opinion cannot be denied.
The 1st note usurious.
The second note having been taken b.y .Parish, as a seeu- . P • J ' . rity for the first note, was .also usurious in its origin. It was made as a usurious mote, because .it was made as a renewal of the first note. It .was not made or issued as a note; and had no existence as such, till Smith indorsed it to Parish. So long as it remained in the hands of Smith, neither he nor Waters could have maintained an action upon it; When, therefore, it .was indorsed t,o Parish, it was a usurious note. Now it seems to me totally immaterial whether the money which was paid on the first note was the funds of Parish or of the -firm of J. & T. *Powell & Co.; or whether for so much of-the amount of the note as ¡was not advanced in cash, Wood was credited in account with -Parish, or with the firm of J. & T. Powell & Co. However these facts may have been, the note of the 10th March was equally usurious in its origin; and was as void in-.'the.hands of J.& T. Powell & Co., or J. & T. Powell, as it -was'in the hands of Parish. .But- it is contended that the plaintiffs held the first note as innocent indorsees; and having obtained the second note, which was not usurious, they are not to be affected by the usury of the first note. This argument assumes facts which I- do not think the,special verdict will warrant. For how does it appear that the plaintiffs were.innocent indorsees of-thefirst note? It was transferred to J. & T. Powell &-Co. by Parish, who was one of the firm. Then, certainly, one of that firm was not an innocent indorsee. The firm transfer the note to two of its members, that is, to the plaintiffs, who, I think, in this'civil.suit, must be charged with all the knowledge and acts of their partner. Indeed, the indorsement by J. & T. Powell & Co. to. the plaintiffs J. & T. Powell, might, for all that appears by the special verdict, have been made by Parish himself) he being ,one of the firm of J. & -T. Powell & Co.; so -that I think the plaintiffs cannot claim to hold the note on which the suit is brought, as a new security taken by innocent indorsees of the first note.'
The 2d was also usurious.
Whether the plaintiffs held the first note as innocent indorsees.
This does not appear.
A firm is chargeable with the knowledge and acts of one of -the partners.
Admitting, however, that Parish was an entire stranger to the plaintiffs, and was, or had been in no way connected with the firm of J. & T. Powell & Co.,, yet I think the plaintiffs could not maintain the ground of their being persons taking a new security, which as to their acts, was free from usury, ‘to secure the amount due on a former security, .of which they were the innocent holders, and which might, in its- origin, have been usurious; for they did not take the new note. It was taken by Parish, precisely as the first, note was taken. If the first note was usurious in his hands, 60 was the second. Both were usurious in their origin; and if so, ■ however, or to whomsoever *they were trans ferred, they were both always “ utterly void.”
But the plaintiffs did not take the new note.
It was take! by Parish.
Upon the whole matter found by the jury, and "which they had a right to find, I am of opinion, that Thomas Waters did not undertake and promise, in manner and form as the said Jacob Powell and Thomas-Powell complained against him, and, therefore, I am of opinion that the judgment of the supreme court be affirmed, although it may be observed that I have come to the same conclusion that they did by a very different course.
Spencer, Senator. Several questions have been elaborately discussed in this cause, which appear to me not to be presented by the record. It contains a special verdict, professing to find the facts in the case, and referring the law to the court. This proceeding is founded upon the statute, (1 E. L. 335,) " that no jury shall be compelled to give a general verdict, so that they find a special verdict, and show the truth of the fact, and require the aid of the court or justices.” A special verdict, then, is to find the facts established before the jury by evidence, and nothing else. It is not its province to find any of the pleadings, or any decision of the court, or any matter of law whatever; and any such matter in a special verdict, must be entirely rejected as irregular and impertinent. Upon these principles, I do not perceive how this court can notice the objection, that William Smith was an incompetent witness. The jury had no right to find that any such objection was " , . ° . „ “ „ a , made; indeed, it was improper for them to find who was sworn. Their province is to find the facts, not the evidence of the facts, and much less by what witnesses that evidence was given. The names of the witnesses ought not to be in the verdict; and the settled and approved forms contain only the points or results of the testimony on the the jury. The plaintiff had a simple and easy remedy to test the question of the competency of the witness, by excepting to the opinion of the judge, which he might have done, and yet demurred to the evidence or had a special verdict. He has not done so, and, for *any thing that appears on this record, which we can legally notice, he has waived all objection to the competency of Smith.
A special find‘the‘facto and nothing
Court cannot tíon°to Smith’s competency as a witness.
A bill of ex-demurrer evidence or may'^Taken in the same
To obviate this objection, however, it has been contended, that as it appears from the whole verdict that Smith was sworn as a witness, and testified, when it is supposed he ought not have been admitted, it goes to the foundation of the defence; and should - be considered by this court, whether the objection was made by counsel or not; and we have been referred to two cases in 14 and 16 John. Eep. Those cases, however, are very different. In one of them, the jury found a state of facts which was wholly inapplicable to the plaintiff’s declaration, and did not, in the least, support the form of action he had adopted. In the other, evidence had been taken on a point not in issue between the parties; and the court rejected it. These decisions went to the merits of the causes respectively; and no one, I think, can dissent from the position of Chancellor Kent, in the case in 16 John, that “ if the foundation of the action has manifestly failed, we cannot, without shocking the common sense of justice, allow a recovery to stand.”
And it is worthy of our serious consideration, how far we can constitutionally disregard a manifest and palpable defect on the face of a record which is presented to us, . t whether that defect has been pointed out m the court below, or insisted upon in this court, or not. As was remarked by the judge who gave the opinion of this court in the case in 14 John., “ the object of counsel is to aid the court in its investigations; and it would be strange if the court was bound to shut their eyes upon every point not suggested by them.” It would make the rights of parties depend more upon the vigilance and ability of counsel, than on the law of the land. Judges must decide according to the law, and if it is not presented to them by counsel, or their attention is not called to the true points of a case, still, if they can themselves discover those points, or ascertain the law, they are bound.by their oaths to pronounce it. The rule adopted by this court, of not noticing ^points which were not stated to the court below, is new and peculiar to this court; and is wholly unknown in the house- of lords in -England. (Vide 1 Archb. Pr. 235.) This author states, that “if the - common errors only are assigned, the plaintiff’s counsel.are 'at liberty to support them ' by Objections to -the record, for-any error whatever appearing • on the face of it.” And the minuteness with which-this author -states .all the -proceedings in verror,- forbids the idea that there can be -any limitation or exception to. the rule, or he would have noticed it. The- rule' must have crept into this-court-from- the.practice of the supreme court, in refusing .to hear-any-objection on -the argument of a-bill of exceptions or; case, that was not-.made - to the j udge at- nisiprius. - The ¡reason is obvious; the objection might have been removed-by further-evidence ; and so far the rule of .this -court is analogous,- and ’ upon ■ the same ground. ¡But the reason does not apply, when a-defect appears on-a-reeord of judgment" in -the supreme court, - which could - not have been amended by that-court. And when such-a defect 'is:-pointed-out, I know, óf-no rule of convenience -that will justify me in -disregarding it. -These remarks -grow out of the point -presented; and -are made inconseq-uenceof the- many discussions at-the bar, during the last -term of this- court1 on the" subject of -this-rule.
How far this regard^’pla’in defect, in record, whetier pointed below"or not*
-In'-the present case, -the objection to- Smith’s competency does- not - go -to -the -merits of -the suit. It - does not reach the foundations of the action, but is merely-to the form-and -mode of the- evidence-; ■ ánd -was one that might -be -waived by the plaintiffs on the- trial. It comes, therefore, strictly within the rule: of-the supreme court, and of this- court, that if-it" does not appear-to have been made, it must be deemed to have -béen waived. But still further, we have no-right'.to know-that'Smith was offered as-a witness, dr Was sWorn:; "the jury hád no right to find' any -such fact. I:t-.had'nothing -to do with the merits of the cause. They wholly ■ exceeded their-province-in stating anything -more than the facts -that Were proved before them, and every thing besides Contained 'in -th'e -verdict must be‘rejected -a's impertinent and‘surplusage. If this be correct, then there *is no.ground, even in this-court, upon which to found the objection to Smith, for we do not legally know that he was a -witness. ■ I am the more disposed to be tenacious of this , , . . . „ , . „„ „ , . ground because the rights of. the .parties will often be seriously compromitted by our- suffering the. different forms of bringing up questions for decision to be intermingled. One single observation will illustrate the position in this very case. If the objection to the-witness had been contained in a bill of exceptions, and the supreme court or this court had sustained it, the consequence .would have been a new trial, in which the objection might be obviated, or further proof adduced., But upon a verdict, .the judgment must be absolute; and the party would be. deprived of all opportunity, of removing the ground of the objection,
where a wit-pg^admitted on exception a waTdefdf ^but verdict. P
I do not think it necessary, therefore, to enter-into'a discussion of the question, whether Smith was.an incompetent. witness by reason of his . interest in the-event of the cause by reason of his name being upon the paper which- he negotiated. Still, as I .may be required to. pass upon that question, I.state that it appears to me, if Smith any interest, it was. in favor of the plaintiffs. It is said, i , . , , ,, , that as he received one half or the .money, he would be responsible to Waters- in the event of a recovery against him. But how so? Smith was a subsequent indorser to Waters, and Waters was.liable to him as indorsee. In possible event can an indorser prosecute his own indorsee, And most clearly, it was not money received by Smith to the use of Waters. If to any one,.it was to the use of Wood, the maker; arid neither, in an action for the money, nor in one on the note,-- could the. verdict in this suit be given-in evidence.. Smith,- then, had- no interest for the defendant. But if . the note were, void for usury, it is my clear opinion, for reasons which are- given in another case, that the plaintiffs might prosecute Smith for the money they had paid him,. This interest,.therefore, was to assist their recovery.
Semi. Smith’s plaintiffs,
An mtermedíate indorser ^n°°™pf®*en^ previous indoragainst géquentme*"
An indorser Morse™6 ^
On the subject of-Smith’s competency to impeach a note to which he had given the sanction of his name, I can only ^express a regret that the case does ■ not. allow a direct decisión, whieh.sháll. finally terminate all controversy. It is certainly to be lamented, that a rule of evidence, of such vast importance in all commercial transactions, should have been so fluctuating. The supreme court had a right to establish such a rule as they deemed conformable to "the principles of the law of evidence. But having established and it having been received and recognized as the law ^ ^an<^ ^or more than twenty years, I feel bound, standing in my place here, to say that court had no authority rescind it. In various decisions which have been made the construction of the statute of frauds, the -ablest judges in England, and in this country, have lamented certain rules had obtained, but have uniformly dedared, that being fortified by a long series of cases it was iQ their power to alter the law. I .mean not to deny the right and authority of a court to explain, modify and alter any rules of construction, or of evidence, that it may have adopted, before such'rules become permanently engrafted into the system of laws ; but where it is admitted that a principle has been long settled and acted upon; has been sanctioned by repeated adjudications, has governed men in the transaction of their business, and has become as much a part of the law as if it had been enacted by the legislature, it is impossible to concede the right of a court to abrogate it, without breaking down the barriers and landmarks that separate the judicial from the legislative branches of the government. I cannot, therefore, sanction the late opinions of the supreme court, which go to invalidate the rule firmly established in the year 1802, in the case of Winton v. Sadlier. That rule, as explained, by the judges I understand to be, that a party who has given his sanction to negotiable paper, by putting his name upon it, and has negotiated it as a fair and valid security, shall not be permitted, by his testimony, to invalidate such paper, by proving it to have been void for any cause whatever, within his own knowledge at the time when he so passed it, unless, at the time of passing it, the facts which rendered it void were communicated or known to the person receiving *it. At this day it is useless to discuss the propriety of this rule; but I cannot forbear remarking, that to my mind it is a most just and equitable rule, and founded upon the funda mental principle of all law, that no man shall directly or indirectly derive any benefit from his own wrong. This rule, however, does not reach the present case. When Henry Parish received the note from Smith, he knew it was void for usury, for he was himself a party to that usury ; and the note was not negotiated as a fair and valid security, but was known to the person receiving it to be void.
The supreme established105 that a party to per°cannotPhato received wasvoidhiits acted6 on that rule for twenty right’ tind the rula
But that rule does not reach this case, as the indorsee knew the note was void for usury.
The next point presented is, that this note was not void in the hands of Powells, the present plaintiffs, because they were bona fide holders. The special verdict certainly finds expressly, that the note was indorsed by J. & T. Powell & Co., to Jacob and Thomas Powell, and it furnishes no evidence whatever of their knowledge of the usury. For it cannot seriously be contended, that the knowledge of Parish, their partner in the firm of J. & T. Powell & Co., is any evidence of the knowledge of the other members of the firm individually. But still, if the note was void for a previous usury, it is of no avail in the hands of an innocent holder. It is alleged that this note was void in its inception, and it seems to be admitted by the counsel for the plaintiffs, that if Parish knew the note was made to be discounted at a usurious rate of interest, and was so discounted by him, it would be void; but he contends that the .note was made before it came to the hands of Smith, for another purpose, viz., in renewal of'a former note; but I think differently. The note had no legal ex-existence, until it came into the hands of some person who had advanced money upon it, and had a right of action, Surely Waters, the accommodation indorser, had no right of action against Wood, the maker, until he had been compelled to pay it; Smith the next indorser, was in the same situation: and up to the moment of its being transferred to Parish, no one could have maintained an action upon it. If Parish had paid the full amount of the note when he received it, by that act he would become *its legal owner, and from that moment the note came into legal existence. Until then, it was inchoate and imperfect. It was in the hands of the agent of Wood, the maker, as an escrow, to be delivered on the performance of a condition, that is, the receipt bf its value; and in this there "is nothing new or peculiar. It is a familiar principle of law, applied daily to deeds and other instruments, that theytaké effect from delivery, It was the delivery, then, of this note to Parish,that made it. That was its inception ; and the usury having taken place at the same time, it was void in its com mencement. I mean fully to adopt 'the opinion- of-'the supreme court in Munn v. The Commission Company, as a perfectly correct exposition of the- statute, -and indispensably necessary to carry'into effect its provisions; and "that the true- test to determine whether a subsequent advance of money upon a note, is a purchase or not, is to inquire whether the note was perfect and available) in the hands of the party selling it ? If it was, and he had a right of action upon it, then-a subsequent discount, at'a greater rate than legal interest, would be a purchase and not usury; but if he had no such’right of action,-then such discount would be usurious.-- I am of opinion, then, that- this note was void for usury at the moment of its inception; that it remains void in the hands of-a bona-fide holder ; that the objection to Smith’s competency does not arise on-this record ; that if it did, he was-not interested in-the event of the suit for the defendant; and that the rule’-excluding- a party to a note from impeaching it, does not apply,- as there was no fraud-in■ suppressing the'fact -of-usury; but the person-receiving it had full notice and information; I am of opinion, therefore,-that the judgment of the supreme court should be affirmed. -
The plaintiffs were innocent holders, the knowledge of their partner not affecting them.
But a note for usury is so in the hands °^”erinnocent
A note ll.aa tence° till it £°nd8 of°iome one who can action upon tt
Chary, Senator. I concur that there is usury in the cáse, if the testimony of Smith is to' be received'. Whether his competency can be drawn in question in this form of a special verdict, I have felt some difficulty; but am free to say, that were that "question regularly, before- us, I should be against his competency. It is more material -*that the law should be settled, than how it is settled; > The whole current of decisions for a long series of years, in the supreme court, has followed -the rule' of Winton v. Saidler, which I understand to exclude the witness.-11 confess I had inclined that we should he justified in taking up the question on the special verdict; hut I yield to the arguments of my brethren; and if no other shape is to be given to the question on the record, shall vote for affirmance.
Stebbins, Senator. The court having given no chance to the plaintiffs in error to amend and put the question of Smith’s competency in the form of a bill of exceptions, or, at least, apply to the court below for that purpose, I had supposed they would take up and decide the question of competency upon the verdict. Even if that question were up, I should be for affirmance.
Joses, Chancellor, and Spekcer, Senator, suggested that a decision should, under the circumstances, be suspended, with a view to see whether some mode might not be thought of to bring what was evidently looked to as the main question between the parties, before the court. They said the competency of witnesses situated like Smith, has been much agitated; the decisions on the question are conflicting ; and its final settlement in this court of dernier resort is of great consequence to the community. They ask whether the record might not be withdrawn; and the matter yet be brought up by way of exception ?
The decision of the cause was suspended accordingly, with a view to hear the counsel for the defendant in error, upon that suggestion.
Talcoit, (Attorney General,) for the defendant in error,
thought the court could not permit a withdrawing of the record without the consent of the defendant in error. He said, at this stage of the cause, there were but two modes in which the court could call for additional matter from the records of the court below; either to allow the "•'plaintiffs to withdraw their assignment of errors, allege diminution, and bring up the matter by certiorari ; or this court might award a certiorari without the withdrawing of the assignment, for their own information. Either assigning or joining in error, generally precluded the party from questioning the truth of the record before the court. (Moore v. Bacon, 3 Cain. Rep. 83. Day v. Wilber, 2 id. 258. Cheetham v. Tillotson, 4 John. 499, 508, 509. Meredith v. Davis, 1 Salk. 270.) But before the court will sanction a certiorari, they will see that there is something material existing below, which it will bring up.
Corrected in England by Stat. 68, Geo. 3, c. 95, vid. Post Dote (®) to Golden'* opinion.
Vid; Jones v. Brooke, (4 Taunt 464, 465, A. D. 1812,) where the rule as held in Winton v. Saidler, founded on Walton v. Shelly, was given up Ay Shepherd and Vaughan, sergt’s., and laid out of view by Mansfield, Ch. J., though it would have been decisive against the admissibility of the witness.
The purchase of an assignable note, at a discount, is not usury; there must be a lending and reservation of interest greater than six per cent per annum. Shackleford v. Morris, 1 J. J. Marsh. 497.
There njust be proof of a lending and borrowing, to constitute usury. Price v. Campbell, 2 Call, 110.
To make a contract for the loan of money usurious, there must exist the intention knowingly to commit usury. Ely v. McClung, 4 Porter, 128.
The intent of parties to commit usury where the contract is not upon its face usurious, is to be collected from the circumstances of the case, the situation and object of the parties at the time of the loan, the character and use to be made of the funds loaned or article transferred, and the time, manner and place of payment. Ib.
In order to bring a contract within the statute of usury there must be a corrupt intention in the contracting parties; the'intent being essential to the usury. Sutton v. Fletcher, 6 Blackford’s Rep. 362; Vide Cro. Car. 501; 1 Campb. 149; 1 Hawk. P. C. 247, sec. 17; 1 B. & P. 151, 154; Comyn on Usury, 16; Am. Ch. Dig., vol. 3, p. 442, et seq.
See also N. Y. Dig., vol 4, tit. Usury.
By the 58 Geo. 3, ch. 93, it is enacted, “That no bill of exchange or promissory note, although it may have been given for a usurious consideration, or upon a usurious contract, shall be void in the hands of an indorsee for valuable consideration, unless such indorsee had, at the time of discounting or paying such consideration for the same, actual notice that such bill of exchange or promissory note had been originally given for a usurious consideration, or upon a usurious contract. Vid. 2 B. & A. 589. note (b.)

Opinion:
Jones, Chancellor.'
It is evident from the opinion of the supreme court, that the cause turned there on the single point of competency. The sole object of the writ of error is defeated, if things remain in their present shape. But we ought not to hear and decide the question of amendment ex parte. Counsel should- be heard on both sides; and for that purpose, perhaps a motion be regularly made. I am free to say, however, that I would not inquire whether there be, j ust now, any thin'g in the supreme court which can be brought up. The practice of that court is well known. They will- even allow an original to be filed nunc pro tunc, to be brought up after the want of it has been assigned for error. In The Manhatten Company v. Osgood, (1 Cowen, 65,) this court allowed the assignment of errors to be withdrawn, in order to a motion below, so to amend the continuances by cur. adv. vult, as to avoid the statute of limitations, which had nominally attached; and also, by entering an old bill of exceptions upon the roll. These amendments were granted by the court below; the amended record then came here on a writ of certiorari; and the cause was heard, and the judgment of the supreme court reversed. (3 Cowen, 612.)
Chapman v. Black, 2 B. & A. 688, & P.