Kent v. Walton

By the Court, Savage, Ch. J. The judge was correct in both points decided by him. To make out the defence of usury, it was necessary to shew that the note was not a valid instrument when discounted by the witness, Ash. The presumption is in favor of the validity of a promissory note; it implies a sufficient consideration. It is well settled that discounting a business note at more than seven per cent, interest is not usury; a note valid in its inception may be bought and sold as a chattel, at its value, real or supposed ; but if it is an accommodation note, it is not a valid instrument until negotiated ; between the original parties it has no legal existence, and receives vitality from its first negotiation. If that be usurious [258] the notéis void. The fact of its being accommodation paper mug(. pr0ved by competent and sufficient testimony. For aught appearing in this case, the payee of the note, Kennedy, would, if living, have been a competent witness; and it is contended that what he said on the subject is proper testimony. Evidence of his declarations was objected to as hearsay ; it certainly was such. The rule that what a witness who is dead has said shall not be received, is subject to but few exceptions,' and this certainly is not one. The other point is also equally well settled. Even although it had been shewn that the first note was tainted with usury, and therefore void in' the hands of the Franklin Bank, who had paid value for it without notice of the usury, yet the giving a new security to an innocent holder for valuable consideration constitutes a new transaction, and the usury of the first note does not affect the "second. In Powell v. Waters, 8 Cowen, 681, Chancellor Jones, speaking of the proposition that a new security, taken in renewal of a prior usurious contract by a bona fide holder, is not avoided by the usury of the original transaction, says, “ that principle applies to the case of an innocent holder of an usurious contract, for which he has given a valuable consideration without notice of the usury.” Golden, senator, expresses the same sentiment at p. 696; among the principles which he considers well settled, he says; “ If an original note or security be usurious, a subsequent note or security, taken in the place of the original note or security by an innocent and bona fide holder thereof, ignorant of the original usury, is not usurious, unless more than at the rate of seven, per cent, was taken upon the new •note or security.” This was the doctrine asserted by the learned judge at the circuit, and is sound law. New trial denied.