Court Opinion

ID: 8303505
Source: CourtListenerOpinion
Date Created: 2022-10-17 11:19:58.52781+00
Date Added: 2024-06-11T16:44:26.737721
License: Public Domain

*636On Petition to Rehear.
Tindall’s petition to rehear categorically asserts that the decision of this Court in this case “is to reverse all” its previous holdings. It cites no decision which, in our opinion, remotely supports this assertion.
Contrary to the statement of the petition to rehear, our decision does not assume that Tindall acquired these notes directly from Ben Block Jones, and does not hold, as the petition asserts, that Jones could not pass any title to these notes to a subsequent- holder. And the assertion of the petition that “this is not an usurious transaction, and in reality there is no usury in the notes” is contrary to the uncontradicted record.
That record is that in consideration of $200 paid him by Jones’ check, and the return to him by Jones of his, Braswell’s, notes, then owned by Tindall, and in the amount of principal and interest of $1,357, Braswell delivered to Jones the notes involved in the case at bar amounting to $2,500 principal, and bearing interest from date.
Necessarily, a large amount of the $2,500 principal of these notes was usury. Thus, there was illegality in the very inception of these notes acquired by Jones in the original transaction from Braswell, the maker. To deny the existence of such illegality is to deny the existence of that which is obvious.
Under our law, such notes, while.in the hcmds of such original holder, are “void or voidable, at the instance of the” maker to the extent of the usury therein. Bradshaw v. Van Valkenburg, 97 Tenn. 316, 320, 37 S.W. 88, 89; Deaton v. Vise, 186 Tenn. 364, 376, 210 S.W.2d 665. That is, these notes were defective to the extent of *637the usury therein while in the hands of the original holder, Jones, a party to the usurious transaction.
These notes were payable to bearer. They came into the hands of Tindall. Necessarily, then, Jones, the original holder, negotiated them by delivery, 65 C.J.S., Negotiate, page 1273, to Tindall or to some one from whom Tindall claims. It does not matter, in so far as it affects the decision of the determinative question in this case, whether Tindall acquired those usurious, in part, notes directly from Jones or from a transferee under Jones.
Such being the situation, the decision of this Court in this case was that the burden is upon Tindall of proving that he took the notes in good faith and for value before maturity without notice of the defects mentioned; that, having failed to so prove (he offered no proof), it must he held that he took these notes subject to those defects. In addition to the texts and decisions mentioned and quoted, in support of this holding, there might have been named Taylor v. Goodrich Tire & Rubber Co., 20 Tenn. App. 352, 354, 364, 98 S.W.2d 1094; 11 C.J.S., Bills and Notes, sec. 654 e , page 63 et seq. There are no decisions to the contrary, in so far as this Court has been able to find.
Moreover, this Court, as it perceives the matter, could not have reached any different conclusion from the legislative requirement of Section 47-159, T.C.A., as follows: “* * * when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as holder in due course.”
Tindall’s petition to rehear seeks to, avoid these decisions and this statute by asserting that a usurious note *638is not defective unless “the whole consideration was ‘illegal or unlawful’ and necessarily voided or destroyed ■any right or title in the transferee * #
The Pocket Part to Volume 11 of Words and Phrases defines the word “defect” as follows: “A ‘de--feet’ means an imperfection, 'flaw, blemish, or fault.” A note, the principal amount of which contains some usury is, under our decisions “void or voidable, at the instance of the” maker to the extent of the usury therein so long as that note is in the hands of the original holder, a party to the usurious transaction. Thus, to that extent the note, while in such holder’s hands, contains as to him “an imperfection, flaw, blemish, or fault”; that is, it is defective as to him within the meaning of the definition, supra, in Words and Phrases.
In Words and Phrases, Volume 11, Defective Title, page 562, there is the following statement:
“The exaction of usury on loans for which a negotiable promissory note is executed renders the consideration for said note illegal, and the title of the person taking such note is defective within the meaning of section 4105, Rev.Laws, 48 Okl.St.Ann. sec. 125, to the extent of such usury. Daniels v. Bunch, 69 Okl. 113, 172 P. 1086, 1088.” (Emphasis supplied.)
Principle likewise requires the rejection of the afore-stated insistence. To illustrate: The insistence of Tin-dall is that if all of the principal amount of a note of, say, $1,000 is usury, then that note in the hands of the original holder is defective in title, admits Tindall. But if $100 of that principal was actually received by the borrower, and the remaining $900 is usury, then such note in the principal sum of $1,000 in the hands of the origi*639nal holder, is not defective in title as to him, says Tindall. The very statement of the insistence is, it seems to this Court, its refutation.
Finally, the petition to rehear insists that the decision of this Court in this case should apply only where the holder seeks to collect a note “as an aggressor”, hut “not where the maker attacks” it.
The statute, Section 47-159, T.C.A., heretofore quoted, makes no such distinction. It simply says that “when” it is shown that the title of the person who negotiated the note (Jones here) was defective “the burden is on the holder to prove that he or some person under whom he claims ■ acquired the title as holder in due course.” Tó accept petitioner’s insistence would amount to an amendment of this statute by judicial fiat.
When the maker establishes usury in the transaction “a presumption arises in the maker’s favor so that the burden is then on the holder in accordance with the terms of the statute to prove that he or some one under whom he claims was a holder in due course, and his failure to offer any proof to sustain this burden authorizes a finding for the maker.” 11 C.J.S., Bills and Notes, sec. 654, pages 54-55.
“A presumption is prima facie proof of the fact presumed, and unless the fact thus established, prima facie, by the legal presumption of its truth is disproved, it must stand as proved.” Washington v. Ryan, 64 Tenn. 622, 634. By reason, therefore, of the presumption in the maker’s favor, usury having been established, it must be concluded that the maker of the note has proved his case, prima facie, whether he be aggressor or the defendant. And, the holder, having failed to offer any proof *640in contradiction of such prima facie case, must be cast in the case, whether he be the one or the other.
Braswell, the party primarily liable here, proved illegality by way of usury in' the inception of the notes. That being true, a certain duty is placed by law upon the holder of the note, whether he be the complainant or defendant. That duty, if he is not to be cast in the suit, is stated in National Bank of Commerce v. Chatfield, 118 Tenn. 481, 493, 101 S.W. 765, 768, 10 L.R.A..N.S., 801, as follows: “ ‘If the party primarily liable proves * * * illegality in the inception of the instrument, or if, from the circumstances, a strong presumption of fraud is raised, the holder must then show that he' acquired bona fide for value under circumstances creating no presumption that he knew the facts which impeached its validity.”
The petition to rehear is denied.