French v. Grindle

[165] The opinion of the Court, after a continuance for advisement, was drawn up by WestoN C. J. In Churchill v. Suter, 4 Mass. R. 156, tho sale of a negotiable note, at a greater discount than legal interest, if indorsed by the party making the sale, was held by Parsons C. J. to be usurious. It was not however the point, upon which the cause turned. And in Manning v. Wheatland, 10 Mass. R. 502, and in Knights v. Putnam, 3 Pick. 184, tho court assume or admit, that there may be usury between the indorser and the indorsee, in a transfer like the one under consideration ; but in neither case was that point directly decided. In the first, it was held, that usury in the transfer could not be proved by tho indorser; and in the second, that if there was usury in the transfer, it afforded no ground of defence in behalf of the maker. In Parr v. Eliason & als., 1 East, 92, it was decided, that if a bill of exchange was free from usury when drawn, it could not be avoided on that ground in the hands of a bona fide holder, notwithstanding there may have been usury in some’ intermediate transfer. In the state of New-York, the settled doctrine is, that the sale of a negotiable note, free from usury when made, and available as a good note before the sale, at a greater discount than legal interest, is not usurious ; although indorsed by the party making the sale. Braman v. Hess, 13 Johns. R. 52, was an action upon a negotiable note, by an indorsee against the indorser, which had been discounted at a greater rate than legal interest; and the consideration actually paid with interest, was recovered. In Munn v. The Commission Company, 15 Johns. R. 44, Spencer J., held, that such a transfer was not usurious, but that it would be, if it was not available in tho hands of the holder, until discounted. The same opinion was given by Chancellor Jones, in Powell v. Waters, 8 Cowen, 669, And in Cram v. Hendricks, 7 Wendell, 569, it was decided, upon great consideration, both in the Supreme Court, and in the Court of Errors, that the transfer by the payee of a valid available note, upon which when due, he might have maintained an action against the maker, and which he parts with at a discount beyond the legal rate of interest, is not an usurious transaction, although the payee on such transfer indorses the note; and [166] that on non-payment by the maker, the indorsee may maintain an action against the indorser. The case before us, is precisely of that character. The plaintiff purchased of the defendant a note, which was good and available in the hands of the latter, at a greater discount than legal interest. The defendant having indorsed it, and having thus given his own security upon the sale of the note, the intimations are very strong in the cases cited from Massachusetts, that the transfer was usurious; although there haye not been there any direct decisions to that point. As it has been otherwise directly and repeatedly adjudged, in the great commercial state of New-Yorfc, the weight of authority is on that side. The policy of avoiding contracts altogether, upon the ground of usury, no longer prevails in this State. The claim of the creditor can now only be defeated, to the amount of the excess, beyond the legal interest. The defendant by his indorsement, upon due demand and notice promised to pay, in default of the maker. He did not obtain a loan of money of the plaintiff, but sold him a note, for the payment of which he was willing to assume a conditional liability. It was not a device got up to avoid the statute of usury, but the sale of a note free from that objection, made in the due course of business ; and we are not satisfied, that the defendant can avail himself of the defence of usury, upon which he relies. We are of opinion howeyer, that the plaintiff has no just claim to recover, beyond the sum by him paid to the defendant for the note, with interest. The plaintiff has offered to release the excess; and this being done, judgment is to be rendered upon the verdict.