Court Opinion

ID: 4925527
Source: CourtListenerOpinion
Date Created: 2021-09-24 00:56:13.9737+00
Date Added: 2024-06-11T08:14:19.206776
License: Public Domain

Mellen C. J.
delivered the opinion of the Court, as follows
The sum demanded in this action is part of a debt contracted in the year 1811. [Here the Chief Justice recapitulated the facts in the case as before stated.]
In examining the question presented in this case, it does not seem material whether the note in suit be considered as a substitute for a usurious note, and given to secure the balance due on the second note ; oi', as being usurious in itself, and in its origin, by reason of the verbal agreement to pay twelve per cent, interest.
It is a principle well settled, that if the “ original contract is “ usurious, any subsequent contract to carry it into effect is also usurious:” 3 D. & E. 531. 15 Mass. 96. and if the substituted security be given to the party to the original security, or his representative, it is void, according to the doctrine of Cuthbert v. Haley, 8 D. & E. 390.
The plaintiff opposes the defence on two grounds:—1. Because the plaintiff must be considered as having purchased the notes in the market, at a fair discount, and under such circumstances, that, according to the case of Churchill v. Suter, the contract cannot be deemed usurious.——2, Because the contract, if usurious, was not made by the defendant; and of course, that he is not entitled, by law, to set up such defence.
With respect to the first objection, when we look at the evidence in this case, we are not able to discover how the notes can be considered as having been purchased in the market by the plaintiff, so as to protect them from the operation of the statute. In cases of such purchase, the note is fairly made. *170without previous concert, or any stipulations relating to interest, and without reference to any one in particular as the intended purchaser. The note being signed and indorsed, is offered for Sale. Its value in the market must depend on the responsibility of the parties to it, the time of payment, and the scarcity of money:—and the purchaser takes these particulars into consideration, and makes the purchase at what is supposed a fair discount. But in the present case, all was arranged before-i hand. The loan was agreed, upon,—the rate of usurious interest settled, between the plaintiff and MiLellan, for whose use the loan was to be made,—and the names of the promissor and indorser were known and accepted as good. Surely if such a mode of doing the business could change the whole transaction into a fair and innocent purchase of the note in the market,—-the law would be worse than useless, and such an evasion no honour to our Courts of justice.
The plaintiff’s second point is entitled to more respect;—but we apprehend it does not, in reality, possess any more merit or solidity than the former.
In the case of Chadbourn v. Watts, 10 Mass. 121. the substituted security was given to Lancaster, and afterwards indorsed to Chaaboum the plaintiff, who had no notice that usury had infected any of the preceding securities which had been given up;—and in this respect: it differs from the case at bar.
In Cuthbert v. Haley, before cited, Grose J. expressly states that if the bond, which was the substituted security, had been given to Plank, who vras the party to the original security and lender of the money on usurious interest, it would have been void:—and the Court proceeded on this principle.
In Young v. Wright, 1 Camp. 139. the contract for usury was not made by the defendant, but between third parties ;—but Lord Elienborough decided the defence to be good.
According to the decision in the case of Bridge v. Hubbard, 15 Mass. 96. cited at the bar, it is of no importance that the contract for the usury was made by M'Lellan with the plaintiff' and the notes signed by others,—he being no parly to them :— because it was known by all concerned that the loan was for his exclusive benefit, and the mode of securing the sum was agreed to by the plaintiff. It is true the Court were divided in *171opinion in that case ; but the division was upon a question that does not seem to arise in the present case. Two of the Court there considered the former contract, which ail admitted to be usurious, as cancelled and extinguished by payment. In the case before us it expressly appears that the last note was given to secure the balance due on the second. But if this distinction did not exist, we might refer to the case of Maddock v. Hammet, 7 D. & E. 184. to shew that such substitution of securities does not amount to paymentand also to Davis v. Maynard, 9 Mass. 242. by which it appears that a new, and even higher security, given for a debt secured by mortgage, does not discharge the mortgage.
If the note declared on be considered as unconnected with the preceding notes, the result must be the same ;—because, at the time it was given, there was an express promise on the part of M'LeUan to pay twelve per cent, interest, and all was executed according to the wishes of the plaintiff, and by a precon-certed arrangement with him for the usury, and for the kind of security. If the principal and interest are secured by distinct notes, or the usury by a parol promise only, and all are executed at the same time,—all are void ;—because such promise to pay interest constituted a part of the contract for the loan ; and the statute declares the whole contract void. If such a device could protect the lender from the penalties of the statute, it would always be evaded with impunity.
We are therefore all of opinion that the motion to set aside the nonsuit must be overruled, and that there must be

Judgment for the defendant.