Mechanics' Bank v. Foster

By the Court.—Ingraham, P. J. It is very clear, if the de [48] fendants had set up the defence of usury in the answer, they would have succeeded in their defence. The note was made for the accommodation of one of the defendants, and was sold by him at a usurious rate of interest. It was therefore clearly void for usury, not only in the hands of Furman, but of any other subsequent holder. But as the defendant has not pleaded this matter as a defence, if is equally clear that he cannot now defeat the plaintiff’s recovery for this cause. The defence now relied on is that the note, so far as it purports to be made by the firm, is an accommodation note, or ra-tlier a note without consideration, and that the plaintiffs are not bona fide holders without notice, and therefore cannot recover. It can hardly be said that the note in any sense is an accommodation note. If it was issued for the purpose of raising money for S. H. Foster, then, although the other member of the firm might not be liable, still he would be if the note was bought by Furman ; and would be, as to that defendant, free from any defence except that of usury. And as to Charles W. Foster, he would not be liable on it, unless it was passed to a bona fide holder who paid value for it, without notice of the facts under which it was made, or under circumstances which warranted the belief that it was used for the purpose of raising money for the firm. It is not necessary for us to decide whether Furman was or was not a bona fide holder. If he knew, when he took the note, of the circumstances under which it was put in circulation, he might be considered as the immediate usurious purchaser, and he would not come into possession of the note in the fair course of trade. His purchase, with knowledge of such facts, might not be bona fide. (Ramsdell a. Morgan, 16 Wend., 575 ; Keutzen a. Parks, 2 Sandf., 60.) The usury, if there was any, was in the first purchase by Furman from Nelson, and that usury would taint the note in the hands of all subsequent holders, even if they paid the full value without any knowledge of the previous transaction. The title to the note by that sale passed to Furman, but any recovery upon it was subject to be defeated by the defence of usury. [49] But the plaintiffs are not in the same condition, and do not stand in the same relation to the defendants. They had no knowledge that the note was sold for the benefit of the defendants, or either of them, and they cannot be charged with any usurious intent. The sale of a note by a stranger to the plaintiff at a sum less than it would have been if only legal interest was deducted, was not necessarily usurious. The note had previously been put in circulation. The presumption was that it was issued for value. If the original sale to Furman had been free from usury, the subsequent sale to the plaintiff, although' at a less sum, would not be a usurious transaction. After the note has thus passed into circulation, usury cannot be predicated upon the dealings in regard to it by subsequent holders. It is only necessary, to defeat the charge of usury, to show, in the first sale, the payment of the whole sum except the legal discount. ^ Transactions in regard to the same paper between the party to whom it was first sold and a subsequent purchaser, cannot be the subject of usury, to excuse the makers from payment. The plaintiffs had a right to take the note, and as between them and Furman they were not limited to a legal rate of discount. The mere fact that the owner of the note, was willing to sell it for a less sum, was not sufficient to throw on the plaintiffs the responsibility of inquiry as to the character of the note. This is the only ground on which the bona fides of their purchase can be assailed, and if it did not require them to .make inquiry as to the character of the note before they purchased it, it becomes immaterial. (Steinhart a. Bokee, 34 Barb., 436; Holmes a. Williams, 10 Paige, 326.) I am, however, disposed to go further in the decision of this case. The borrowing of money by one partner on the note of the firm is within the ordinary powers of a partner, and within the ordinary course of business. Freed from "the charge of usury, the defendants would be liable, unless knowledge that the proceeds were not to be used for the.benefit of the firm was brought home to the party discounting it. The note, therefore, in "Furman’s hand might, for all that was known to the plaintiff, be a valid note; and the presumption was that it was so, in the absence of any proof to the contrary. (Warren a. French, 6 Allen, 317.) The sale of the note under such circumstances [50] to the plaintiff by Furman was not a circumstance to put them, on inquiry, or to deprive them of the character of bona fide holders for value. (Conn. River Bank a. French et al., 6 Allen, 313.) The judgment should be affirmed. Clerke, J., concurred.