Otto v. Durege

By the Court, Dixon, O. J. The questions involved in this case are confined to the conclusions of law upon the facts found. The facts are not contested. The judge found that Yon'JDeutsch, the agent of the defendant Durege, purchased the note in question without knowledge of its origin or the purpose for which it was executed. The court is of opinion upon these facts, that the transaction was not usurious, and that the defendant is entitled to recover from the plaintiffs the principal and interest specified in the note.— Upon well settled principles, and avoiding the confusion introduced by inconsistent and conflicting adjudications, our reasons are briefly these: Negotiable paper, like any other property, may be bought and sold below its real value and for less than its face, without imputation of usury, although the purchaser thereby obtains much more than legal interest for the use of his money. The penalties and prohibitions of the statute are aimed at the receiving or contracting to receive a greater rate of interest than that prescribed by it upon the loan or forbearance of money, or other things, and do not apply to the sale of a note or any other vendible commodity, which, when in good faith intended as such, may be sold and transferred for such price as may be fixed by the agreement of the parties. The only limitation upon this principle, if it may be properly so called, is that made necessary for the purpose of giving effect to the spirit and intent of the law [574] against usury, by preventing the parties from resorting to the form of a sale as a cloak or cover for what is in reality a usurious loan. In such cases the law looks behind the shifts and devices of the parties, and, according to the fact, declares the transaction to be a ban and not a sale. But in order to do this it must appear that the supposed purchaser had notice, either actual or derivable from the circumstances of the case, of the trick or device resorted to, and therefore consented to it; otherwise he will not be divested of the character and rights of a purchaser. Eor usury is a matter of intention, and to render a contract usurious both parties must be cognizant of the facts constituting the usury, and have a common purpose of evading the law. 1 Hill, 227 ; 1 Barb. Ch. R, 44; 9 Ind., 140; 3 Grill & J., 123 ; 7 id., 44; 1 R. I, 151; 2 Harrison (N. J.), 191; 4 McLean, 360 ; 1 Dali., 217 ; 2 id., 92. And the intention on the part of the maker and seller of the note, to commit usury, will not, unless communicated or known to the party intending to make the purchase, supply the want of such intention on his part, or change his relation to the transaction. 2 Munf., 36; 5 Rand., 333 ; 5 Gratt., 357; 10 Paige, 326; 1 J. J. Marsh., 497; 10 B. Monroe, 12 ; 26 Penn. St.,259. Having advanced his money in good faith as a purchaser, the law will not permit the secret intentions and motives of the other parties to transform it into a loan; for that would be to make the unlawful purposes of the guilty, instruments for the destruction of the innocent. The law against usury is penal in its nature, and reason and justice dictate that the forfeitures imposed by it ought not to be visited upon those who are innocent of any intentional violation of its provisions. The principle that a note infected with usury is as void in the hands of a subsequent bona fide holder, as of a person having full notice, does not affect a case like this. The note in question was not invalid in the hands of Winkler on the ground of usury, but for want of a sufficient consideration. The mere intent to commit usury cannot take the place of the fact, so as to make the parties punishable within the meaning of the law. If Winkler had sold the note for the full amount for which it was given, and paid over the money to the plain [575] tiff Otto, no one would have thought of questioning the transaction on the ground of usury. This proves that was no usury prior to the sale, and as it cannot, for the reasons above given, be made out from what happened at that time, it follows that the objection is not sustained. If Yon Deutsch had known the character of the paper, and that it was made in order to give efficacy to a usurious contract, or if the transaction had been attended by circumstances which should reasonably have aroused his suspicions, and put him upon inquiry, the question would have been different. As it is, the judgment of the circuit court must be reversed, and the cause remanded, with directions that it be dismissed. Ordered accordingly.