Dowe v. Schutt

By the Court, Beardsley, J. There was no error in the charge of the judge. If the first note had been given in consideration of a sale and transfer, or an agreement to sell and transfer, to the defendants, debts then due to Southard, it would have been business and not accommodation paper in his hands. It would have been but the common, case of a note given on the purchase of property by the makers, and which, as between them and the seller, they would be bound to pay. Where cross notes are made, and specifically exchanged, by the makers, each note is the proper debt of the maker thereof, and each holder is a purchaser for value. As the note is a debt due to the holder, and his property, he may sell it on such terms and at such price as he pleases. It is strictly business paper, and although discounted on usurious terms, that cannot affect its validity as respects the maker. (Cameron v. Chappell, 24, Wend. 94, and authorities referred to; Chitty on Bills, 10th Am. ed. 708.) In such cases.the relation of principal and surety does not exist; and it is plain that a promise to indemnify the maker would not be implied. But where a note is made by one person for the benefit of another, a promise to indemnify the maker exists, for in every case of suretiship such a promise is implied [624] by law where none has been expressly made. An accommodation note is invalid in the hands of the person for whose benefit it was made, and if discounted for him at an usurious rate, it is equally invalid in the hands of the person who thus receives it. The legal attributes of accommodation paper are not changed by a promise, performed or unperformed, to give security for its payment by the person for whose benefit it was made. It is still but accommodation paper. The person for whom it was made cannot collect it. As to him, the maker is but a surety, and if the note is transferred on usurious terms, it is void in the hands of the person who thus receives it. These principles are too plain to require a reference to authority for their support. Upon this part of the case therefore, as indeed throughout, the charge was unobjectionable. But although the first note may have been unavailable in the hands of Southard, having been made for his accommodation, still, if he represented it to be business paper, and it was purchased by the plaintiff as such, relying upon the truth of that representation, then although the purchase may have been at an usurious rate, yet as between the plaintiff and Soumard, there would be no usury, and the latter would be bound by his guaranty that the note should be paid. This, however, would not change the character of the note: it would, notwithstanding the false representation of Southard, be, as to the makers, usurious and void. (Holmes v. Williams, 10 Paige, 326; Dix v. Van Wyck, 2 Hill, 522.) And the note in suit having been given by*he makers, for a part of the first note remaining unpaid, atid in substitution for their liability on that note, is equally invalid with the first. Had these defendants gone to the plaintiff and agreed to purchase of him, his claim upon Southard, which was then a valid debt to the extent of the money advanced, and had the note in suit been given upon such a purchase, it might have been obligatory within the principle of the case of Holmes v. Williams. But there is not a scintilla of evidence, nor the slighest reason to believe, that this note was given upon any such arrangement or on any such consideration. The guaranty of Southard was not thought of by either party, and the [625] note was a mere renewal of the former invalid security. The second note, therefore, as well as the first, was as between these parties void. New trial denied